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| The Basics | Holiday parties: Eat, drink and be wary
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Throwing a holiday party? Social host laws say you may be liable if your guests get into an accident on their way home. Heres how to see if youre covered. Plus, 7 tips for hosting responsibly.
By Karen M. Kroll, Bankrate.com
It's holiday time again. That means many party hosts will be uncorking the bubbly, spicing up the eggnog or mulling the wine.
Surely, 'tis the season to be jolly, but if you let your guests get too merry, you could find yourself dealing with a lawsuit.
Under what are known as "social host laws," individuals who serve alcohol may be found liable if a guest who was drinking is later involved in a car accident.
"People need to understand that if they're serving any type of alcoholic beverage, they're going to be named in a lawsuit in the event a person leaves and gets in an accident," says Andy Thompson, head of The Thompson Group, an insurance agency in Parker City, Ind.
Last year, 17,400 people -- an average of nearly 50 per day -- died in alcohol-related crashes, according to statistics from the National Highway Traffic Safety Administration. The percentage of alcohol-related traffic fatalities tends to increase during the holidays.
Few familiar with the laws
If you've never heard of social-host laws, you're not alone.
"These are much less known than other laws," says Phil Berardelli, author of several books on safe driving, including The Driving Challenge: Dare to be Safer and Happier on the Road.
In fact, a recent survey by the Independent Insurance Agents and Brokers of America found that more than two-thirds of people didn't know they could be held financially liable if someone who drank at their home becomes involved in an auto accident. These laws apply whether you own your home or rent. The specific laws vary from state to state. Currently, more than 30 states have either case or statutory laws that hold hosts responsible for providing alcohol to minors, or to people who are intoxicated and later are involved in car accidents. An attorney or your insurance agent should be able to explain the law in your state.
To be sure, different people hold different views on just how responsible a party host should be for the actions of a guest. While most would hold adults responsible if they provide or allow liquor to be consumed by those under the legal drinking age of 21, opinions are more divided when it comes to adult guests who drink and drive. However, given the litigious environment today, it's wise to be aware of the potential liability.
Of course, the most significant concern in an automobile accident is the potential for injury and loss of life. Few of us would want to know that we contributed, however unintentionally, to the death or injury of another person.
"The general public often doesn't understand how traumatizing it can be for families (of the victims of drunk drivers) to deal with this devastation in their lives," says Wendy J. Hamilton, national president of Mothers Against Drunk Driving.
Protecting your party
Fortunately, you can take steps to limit the potential risks of hosting a party.
Before you send out the invitations, check your homeowners, renters or condo-owners insurance policy, or discuss it with your agent. Make sure it provides personal-liability coverage. Some homeowners policies cover only the structure or dwelling, says Don Griffin, of the National Association of Independent Insurers, a professional group based in Des Plaines, Ill.
Renters are at particularly high risk because roughly two-thirds of them don't carry any renters insurance, says Kevin Callahan, spokesperson with the Independent Insurance Agents and Brokers of America.
"If you have a party, you can get sued if a person gets drunk, trips and hits his head on the coffee table. You would have nothing to use to pay the legal bills," says Callahan.
Look for wording that indicates that you're covered for liabilities arising from the negligence of the homeowner, says Griffin. This should help protect you in a lawsuit, if you unknowingly serve alcohol to someone who is becoming intoxicated.
Make sure the policy doesn't exclude incidents that arise, even in part, from serving alcohol, says Kristina Sommerkamp, head of Sommerkamp Insurance and Financial Services in Boca Raton, Fla. "There are so many specific exclusions on policies today."
Consider an umbrella policy
If you don't already have one, you may want to consider obtaining an umbrella liability policy. These are policies that supplement your homeowners coverage. Say that your homeowners coverage limit is $300,000. An umbrella liability policy would kick in once that $300,000 is used up. Umbrella policies typically start at $1 million in coverage for a rather modest premium, and go up from there. (You can read more about them, here.)
The amount is calculated in addition to the coverage you have under your homeowners policy. If your homeowners liability coverage is $300,000, and you have a $1 million umbrella policy, your total coverage is $1.3 million. While this may sound like quite a bit of money, given the legal costs and possible jury awards in drunk-driving lawsuits, it could go quite quickly.
Who should think about umbrella policies? While it's difficult to state a precise income or asset level at which an umbrella policy makes sense, if you've acquired a measurable amount of assets, you'll definitely want to consider one. If your annual income has hit the six-figure range, you'll also want to look into them, says Sommerkamp.
Fortunately, obtaining an umbrella policy doesn't have to cost an arm and a leg. Annual premiums usually range from $200 to $600.
A couple of things to keep in mind. First, make sure that you don't have a gap between the coverage amount provided by your homeowners policy, and that provided by your umbrella policy, says Sommerkamp.
For instance, if your umbrella policy covers costs above $300,000, but your homeowners insurance limits its coverage to $250,000, you would have to make up the $50,000 difference, should you file a claim. This is more likely to happen if you're using different carriers for your homeowners and your umbrella policies, says Thompson of The Thompson Group.
"Then you want to be sure that the underlying coverage is adequate and will meet the umbrella coverage," says Thompson.
Review your policies and ask your agent if you're not sure.
In addition, purchasing an umbrella policy doesn't eliminate your need to remain a responsible host. Most importantly, you don't want to serve alcohol to anyone under 21.
"If you have an umbrella liability policy, but you serve liquor to a minor, it puts everything in jeopardy," says Callahan. Another point to keep in mind: Some policies may not provide coverage if you knowingly serve an individual who already is acting intoxicated.
Catered parties
If it's appropriate, you may want to hire a professional catering firm to man the bar. Their experience serving alcohol should put them in a better position to determine who is reaching their drinking limit. And, some guests may be more receptive to a stranger cutting them off, rather than their friend or family member.
However, you can't assume that engaging a caterer or bartender gets you off the hook. First of all, you'll want to verify that the firm is insured. "If it's a small firm, they may have no coverage, or little coverage," says Sommerkamp.
Find out how much insurance coverage they have and whether you can be added to it for the party. Ask to see the actual certificate and even call the insurer to find out if it's current and what, if any, exclusions apply. "It's an extra layer of protection," says Thompson. Although someone still could come after you, the caterer's policy would provide some coverage.
What if you own a business and host a holiday get-together at your home or office? For starters, as a matter of good business practice, you already should have an umbrella liability policy for your business, as well as for your home, says Thompson. That's because if an employee is involved in an alcohol-related crash, you could be sued as an individual and as a company.
7 tips for hosting responsibly
Finally, be a responsible host. For some get-togethers, it may be easiest to simply not serve alcohol. If you're hosting a brunch or lunchtime party, this may be a natural solution.
If you are going to serve alcohol, take a few common-sense precautions:- Limit your guest list to those you know well.
- Before the festivities get under way, let guests know you'll provide transportation home if their behavior seems questionable.
- Only serve party-goers who you know are over the legal drinking age of 21.
- Stay sober and serve the drinks yourself, so you know which guests are reaching their limit.
- Have plenty of food available, so guests aren't drinking on an empty stomach.
- Close the bar at least an hour before people will be leaving.
- If a significant number of young people will be attending a party at which liquor is being consumed, have them turn in their car keys as they enter and only return them when you are confident they have not been drinking.
Finally, if an incident does occur, notify your insurer right away. Some policies will exclude claims if you didn't provide "timely notice."
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