Alcohol 101: Dram Shop Liability and Legislation

Holding Retailers Accountable for Injury and Damages

A New Jersey jury recently awarded $135 million to the family of a girl paralyzed in a 1999 automobile accident caused by a drunk driver following a New York Giants football game. The jury assessed punitive damages against Aramark Corporation, the team’s beer concessionaire at Giants’ Stadium, and split the liability for the compensatory damages evenly between the company and the driver who caused the accident—who reportedly had a blood alcohol level double the legal limit at the time of the accident.

Aramark’s liability for the accident caused by its patron is based on “dram shop” laws. The term “dram shop” comes from 18th century businesses in England that sold gin by the spoonful, called a dram. Dram shop laws hold retail establishments accountable for any harm—death, injury, or other damages—caused by an intoxicated patron.

There is a great deal of variation in dram shop laws across the country. Ten states, such as Nevada, impose no dram shop liability. The remaining forty states impose dram shop liability to varying degrees.i Some states impose liability on retailers only in cases of illegal alcohol sales. In California, for example, dram shop liability is limited to cases involving alcohol sales to obviously intoxicated minors. States with stricter dram shop laws can hold retailers or social hosts accountable for third-party damages. In almost all states, however, dram shop liability must meet the “obvious intoxication” test: the employee/retailer knew, or should have known, that the customer was intoxicated, and therefore a danger to him/herself and others.

Dram shop liability can help prevent problems by shaping the environment in which alcohol is sold. As stated by Illinois’ courts, “the dram shop act is intended to place responsibility for damages caused by intoxicants on those who profit from the sale of alcohol … [and] to protect the health, safety, and welfare of the people from the dangers of traffic in liquor.” ii These laws can provide an incentive for owners of alcohol establishments to develop responsible service policies and train their employees when to refuse alcohol sales.