Accepting Liability Is Part Of Hosting A Holiday Party
by Benny L. Kass
Question: I live in a condominium complex containing over 200 units. Now that the holiday season is upon us, I am writing to address a concern I have had for several years, namely that alcohol (both wine and hard liquor) is being served at the annual holiday party that takes place in our building's lobby. Additionally, at our annual meeting a few months ago, wine was served -- even though the meeting took place at a local church near our building. Is this a good idea? Does this expose our association to any liability? Answer: You bet it does. Liquor liability is a complex area of the law, and the legislation and the court opinions are not consistent. Each state (including the District of Columbia) has different laws -- and different interpretations -- as to the potential liability of an employer, homeowner, and even a community association which serves liquor at a party. Clearly, the safest method would be abstinence. Just don't serve -- or allow -- alcohol to be served (or consumed) at your functions. However, one has to recognize reality; many people just have to have their drink (or drinks) at these social events. If liquor is not provided, we all know that people may bring in their "brown bags" containing bottles of alcohol. After all, Al Capone made a lot of money during prohibition. Thus, if you serve alcohol at your party, what steps should you take to protect yourself -- and the other owners in your association? First, you should have an outside bartender, who is an independent contractor and not an employee of the association. You should not allow bottles of alcohol to sit around without any control. The bartender should be instructed that no person who appears to be intoxicated, should be served an alcoholic drink under any circumstances. The bartender should also be instructed that under no circumstances should any minor be served any wine or liquor. If there is doubt as to the age of the person, the bartender has the absolute right to "card" that person, and ask for his/her identification. It is recommended that the Board should hire a bartender who will sign a contract, which provides among other things, that the bartender will be liable for his/her negligence and has his own insurance. Many companies will provide such bartending services. Second, you should appoint a "liquor committee" to monitor the crowd. This should be done in a friendly, unobtrusive manner, and the committee members should be required to circulate throughout the party, with a view toward making sure that people are not intoxicated. If a committee member finds such a person, he/she should be cautioned not to have any more drinks, and the bartender should be alerted to this situation. Third, if your meeting is away from your building (or if there are non-resident owners present), you should arrange for "designated drivers" who will take people home if they are unable to drive by themselves. Finally, you should immediately talk with your association attorney and your insurance agent. You want to make sure that your association has adequate protection should the inevitable occur. Keep in mind that most general liability insurance policies usually exclude liquor liability; this means that there will be no coverage should someone get injured or killed as a direct result of the liquor which was served at your party. However, community associations may be protected by host liquor liability insurance coverage, and you must make sure that your insurance policy contains this additional coverage. If it does -- and subject to the terms of the policy -- your association may be indemnified by the insurance company. More importantly, should there be litigation, the insurance company will pay for the legal defense against any third party liability claims arising out of the serving of alcoholic beverages. Often, the legal costs to defend a lawsuit are more costly than the actual judgment, if any. You should note that I used the words "subject to the terms of your policy." It is important that you carefully review your insurance policy, and discuss its coverage with your lawyer and your insurance agent. Insurance policies -- and their coverage -- differ from company to company (and indeed from policy to policy) and you want to make sure that you have the very best coverage possible. If your association is sued -- and if a judge or jury renders a monetary award against the association -- someone will have to pay the plaintiff. If there is adequate insurance, this will be paid by the insurance carrier. On the other hand, if there is no coverage -- or inadequate coverage -- the owners will have to ante up the money. Additionally, there may be liability on the part of each Board member. Let's take this example. Your condominium has 200 unit owners. Let us assume for this illustration that every owner has the same percentage ownership interest -- which would be 00.50 percent. Let us further assume that a jury has awarded a $3,000,000 judgment against the association in favor of a Plaintiff who fell off your roof while drinking at your party. Your insurance coverage is only $1,000,000. There is a shortfall of $2 million. Thus, in our example, the association will be responsible for this deficiency. And -- depending on the legal structure of your association -- each owner may be obligated to pay a share of the shortfall. In our example, that extra drink may cost each owner as much as $10,000. Finally, you should note that even if there is adequate insurance -- called "host liquor liability insurance coverage" -- this will not apply, and will not protect the association, if alcoholic beverages are being sold at your party. While I personally cannot recommend that you sell any such beverages, if that is your desire, you must obtain additional liquor liability insurance coverage immediately. This is a highly complex area of law, and one where the stakes may be very high. However, common sense -- and careful advance planning -- may save you countless headaches and a lot of money. Do you really want to have this holiday party? | 
