The holiday season, with the Super Bowl not far behind, sparks opportunities for homeowners to entertain. But before you pop open the champagne this New Year’s Eve or on any other occasion, you should check your home insurance to make sure you're protected if tipsy guests cause injury or damage.
“Most of us socialize and spend time with family and friends around the holidays, and usually while enjoying each other’s company, some kind of alcohol is served or available,” says Lora Thompson, a claims manager at MetLife Auto & Home.
However, in some states, a homeowner can be sued if a drunken guest leaves the party and gets into an accident or otherwise harms a third party. If something like that does happen, your home insurance could provide some financial protection.
According to the Insurance Information Institute, 43 states have laws regarding social host liability, a legal term describing the responsibilities a homeowner has when serving liquor to guests.
Those state laws run the gamut, says Matthew Friedman, a personal injury attorney in Chicago. Some states hold party hosts civilly liable, meaning they could be ordered to pay for injuries or damage resulting from an incident caused by a guest who drank alcohol in their homes. Other states hold party hosts criminally liable, meaning they could be ordered to serve time in jail or pay a fine.
Like many other states, Illinois holds adults liable for giving alcohol to people under age 18, but “generally speaking, social hosts are not liable if their drunken adult guests go out and hurt somebody,” Friedman says.
However, that’s not the case in New Jersey. There, party hosts who give alcohol to adults who are “visibly intoxicated” may be held responsible for any damage or injuries inflicted by that person, according to New Jersey law firm Chamlin Rosen Uliano & Witherington. In Massachusetts, a party host who serves alcohol to an intoxicated guest is considered negligent and could, therefore, be liable for damages, according to the Essex District Attorney's Office.
Rhode Island is an example of a state that holds adults who serve alcohol to minors civilly and criminally liable. Similar laws, called dram shop liability laws, apply to commercial establishments or people who sell liquor to consumer; these laws hold such establishments responsible if a consumer gets drunk and then inflicts damage upon someone.
You can find out which social host liability laws are in effect in your state by checking your state attorney general’s website or by searching online for the name of your state and the term “social liability."
The insurance factor
Many home insurance policies will cover some legal fees or damages resulting from the loss of a civil lawsuit, Thompson says. But that doesn’t mean your home insurance would pick up the entire tab, particularly in a criminal case.
Most home insurance policies won’t cover intentional or criminal acts, so if a homeowner knowingly serves alcohol to a minor in a state where that's illegal, coverage may not apply, Thompson says. In addition, punitive damages, which are awarded to punish the defendant, typically are not covered by a home insurance policy.
The coverage limits on your policy play a role, as costs that exceed those limits will have to come out of your pocket.
Even if social liability laws aren’t an issue in your state, ensuring the welfare of your guests is a good practice.
“If people are just responsible and use good common sense in taking care of their guests and being aware of what’s going on in their home, they’ll have a great time, a party will end, everyone will get home safely and there will not be any issues,” Thompson says.
Reducing the risk
While the only way to totally avoid liability in a state with social liability laws is to not serve alcohol, homeowners can lower their risks by taking a few precautions when they entertain:
• Encouraging the use of designated drivers minimizes the chances of a drunken guest getting into an auto accident when leaving the party, according to the Insurance Information Institute. Hosts can also call a cab for guests who appear too intoxicated to drive.
• Serving non-alcoholic beverages and plenty of food can help balance out the effect of alcohol on guests.
• Switching to non-alcoholic beverages such as coffee and soft drinks at a certain point ensures that guests have time to sober up before leaving the party.
• Hosting the party at a commercial establishment with a liquor license lets homeowners transfer their risk to that establishment.
• Ensuring that all guests are over 21 lets hosts avoid inadvertently serving alcohol to underage people.
Despite the risks involved with serving alcohol to guests, most homeowners aren’t worried about it, according to a survey by MetLife Auto & Home. Only 42 percent of Americans are concerned that a guest could be involved in an accident after consuming alcohol, the survey shows, and 58 percent are not concerned about being named in a lawsuit if a guest is involved in a drinking-related accident.
However, most hosts plan to limit their guests’ risk of drinking and driving. In the survey, 80 percent will serve food to help minimize the effects of alcohol, more than 60 percent will offer a designated driver and 55 percent will serve only non-alcoholic drinks after a certain point during the party.