It is the holiday season, a time for office parties and charity events. While gatherings can provide opportunities for professionals to mingle casually with their co-workers and clients and can help boost employee morale, they can also prove to be a liability for businesses that serve alcohol. That is why businesses should take reasonable precautions to prevent any risks and financially protect themselves by making sure they have the proper insurance, warned the Insurance Information Institute (I.I.I.).
Forty-four states plus the District of Columbia have enacted liquor liability laws. These laws make it possible for a plaintiff to hold those who serve alcohol to an intoxicated or underage person responsible for any damage or injury caused by these same individuals after they leave the party. Most of these laws also offer an injured person, such as the victim of a drunk driver, a method to sue the person who served the alcohol. There are circumstances under these same state laws where criminal charges may also apply.
Liquor liability laws were intended originally to apply to taverns, bars, and other establishments selling and serving alcohol. However, the liability laws have expanded over time to include “social hosts” (such as those holding a holiday party in their home or business) in some states giving them some exposure to the risk of liability for serving alcohol.
“In many states you can be held legally responsible for your employees’ actions after they leave the party,” said Loretta Worters, vice president of the I.I.I. “If you are throwing an office party where alcohol is served, you have a responsibility to make sure that your employees are capable of driving safely.”
Worters noted that when business owners host a holiday party and serve alcohol as part of the festivities, liquor liability would most likely be covered by their commercial general liability (CGL) policy. “It’s best to check with your insurance agent or broker first,” she said, adding, that “if an employee becomes intoxicated and assaults another employee at the party, the incident might be excluded under the CGL policy.”
In addition to a CGL policy, businesses should also consider purchasing an Employment Practices Liability Insurance (EPLI) policy. An EPLI policy will protect a business from discrimination, sexual harassment, emotional distress, and other workplace-related issues. When you buy the coverage, make sure it includes “third-party” coverage. Third-party coverage refers to claims made by non-employees, usually clients or customers, who allege that an employee engaged in wrongful conduct such as sexual harassment or discrimination. This can be important coverage, for example, if someone in management has had too much to drink and makes an inappropriate overture to a client or customer. Without a specific policy endorsement for third-party claims, EPLI policy forms do not cover these types of exposures.
“Even innocent flirting or touching can be misconstrued and result in a lawsuit,” explained Worters.
In addition to overtly inappropriate behavior, if someone puts a video clip or picture on YouTube or Facebook that could result in reputational harm, it is also covered under an EPL policy.
Over the years, office parties have changed considerably. Alcohol used to flow freely, and employers would sometimes overlook inappropriate conduct, explaining away bad party behavior without taking any action. Today, lawsuits are so rampant that some companies have concluded office parties involving alcohol are not worth the risk.
How to Protect Your Business
If you plan to host a holiday party at which you will be serving alcohol, the I.I.I. offers the following tips to prevent a lawsuit:
- Advise employees to be responsible. Include a statement on the party invitation and/or circulate a written reminder to all concerned on the responsibilities to drink only in moderation and to avoid driving after drinking.
- Emphasize to management that they must lead by example.
- Hold the party at an offsite location. If problems do arise, it is better that they occur away from the business premises. Depending on the state, the liability will generally be on the restaurant than the company. However, it is not unusual for an employer to be named as a defendant in a civil lawsuit if an intoxicated employee leaves any company-sponsored event and injures himself or herself or another person as a result.
- Do not pay for alcoholic drinks. Guest will drink less if they have to pay for the drinks themselves.
- If you feel you must furnish alcoholic beverages, consider a drink voucher system to limit the number of drinks served. Or, serve alcohol for only a short period.
- Consider hiring a professional bartender. Most bartenders are trained to recognize signs of intoxication and will limit consumption by partygoers.
- Offer non-alcoholic beverages and always serve food. It is proven that food can help counter the effects of alcohol.
- Do not serve alcohol to minors.
- Stop serving liquor toward the end of the evening and switch to coffee, tea and soft drinks.
- Arrange alternative transportation. Anticipate the need for alternative transportation for all employees and guests and make special transportation arrangements in advance of the party. Encourage all employees and guests to make use of the alternative transportation if they consume any alcohol.
Worters advised business owners to talk with their insurance agent or company representative about their liability insurance coverage and any exclusions, conditions or limitations to their policies for this kind of risk. “Appropriate liability insurance coverage is necessary. In some cases special event coverage may be available that will cover both liquor liability and other liability exposures specific to the event.”