Monday, October 12, 2015

Indiana Dram Shop Law: A Primer On The Past, Present, And Future of Alcohol Liability In Indiana



Indiana Dram Shop Law
A Primer On The Past, Present, And Future of Alcohol Liability In Indiana

Written By:

Christopher A. Pearcy
Hume Smith Geddes Green & Simmons LLP

I.                Introduction

When can a bar, restaurant, social host or other furnisher of alcohol be liable for subsequent intoxicated actions of the persons they serve?  Indiana, like other states, has historically struggled to define the parameters of when dram shop liability can attach in Indiana.  The article addresses this complex question by discussing where the law has been, where it is now, and where it may be going.

II.             History: Immunity, Negligence Standard, Statute, Immunity again…?

a.     Common Law

Once upon a time providers of alcohol had no dram shop liability at common law.  Early on, it was universally held that “to either sell or give intoxicating liquor to ordinary able-bodied men” is not a tort at common law.[1] The reason usually given for this immunity to providers of liquor was that "the drinking of the liquor, not the furnishing of it, was the proximate cause of the injury.”[2]

This rule sustained a number of legal challenges over the years.  In 1966, Indiana’s Supreme Court held in Elder v. Fisher that “the general principles of common-law negligence should be applied to cases involving intoxicating liquor."[3]  However, this holding has been interpreted to apply common law liability only in situations where a “special statutory provision” did not already control.[4]  

            This was obviously followed by much debate over when statute would control the claim vs. when common law negligence would apply.  In 1988, the Indiana Supreme Court handed down the landmark decisions of Gariup Construction Co. v. Foster[5] and Picadilly, Inc. v. Colvin.[6]  In essence, these cases held that a common law negligence/reasonable care standard existed independent of Indiana’s current statutory scheme.  The only statute applicable, and construed by those cases at the time was the criminal dram shop statute, which stated:

It is unlawful for a person to sell, barter, deliver, or give away an alcoholic beverage to another person who is in a state of intoxication if the person knows that the other person is intoxicated.”[7] 

Gariup and Picadilly definitively held this criminal statute was not a “special statutory provision” as pursuant to Elder, and a common law negligence/reasonable care standard applied to dram shop claims.  

Per these holdings, providers of alcohol had a duty to third-party Plaintiff’s when the provider “knew or should have known” the allegedly intoxicated person (“AIP”) served was intoxicated.  Harm to third parties was be foreseeable if that provider knew or should have known of the intoxication and served the AIP anyway.  Gariup and Picadilly were landmark decisions in favor of Plaintiffs, and prompted serious concerns for bars, restaurants, social hosts, and other providers of alcohol.  

However, Gariup and Picadilly were decided about two (2) years too late.  While these cases were pending on appeal, the Indiana Legislature passed our modern Dram Shop Act in 1986.[8]  That Statute applied only to actions accruing after April 1, 1986.  Thus, it expressly did not apply to Gariup and Picadilly because those actions accrued in the early 1980’s.  

Gariup and Picadilly expressly acknowledge they don’t deal with or construe the new Dram Shop Statute.  However, the overlap continues to cause confusion, and still prompts arguments by Plaintiff’s attorneys that an independent common law negligence cause of action still exists.  As discussed below, the Dram Shop Act (not common law) is what now controls civil liability for furnishing alcohol in Indiana.

III.           Indiana’s Dram Shop Act: Immunity To Furnishers of Alcohol

a.     Introduction

 It has been held that the Indiana Dram Shop Act, I.C. § 7.1-5-10-15.5, “shields a person who furnishes an alcoholic beverage from liability in a civil action for damages caused by the impairment or intoxication of the person who was furnished the alcoholic beverage.”[9]   This is purportedly true as long as person served was not visibly intoxicated.  Specifically, the Dram Shop Act states in relevant part:
Liability of person furnishing alcoholic beverage to intoxicated person.
 Sec. 15.5. (a) As used in this section, "furnish" includes barter, deliver, sell, exchange, provide, or give away.

(b)  A person who furnishes an alcoholic beverage to a person is not liable in a civil action for damages caused by the impairment or intoxication of the person who was furnished the alcoholic beverage unless:
(1)  the person furnishing the alcoholic beverage had actual knowledge that the person to whom the alcoholic beverage was furnished was visibly intoxicated at the time the alcoholic beverage was furnished; and
(2)  the intoxication of the person to whom the alcoholic beverage was furnished was a proximate cause of the death, injury, or damage alleged in the complaint.”[10]

This Statute “…adds to and codifies the basic elements necessary to establish liability on the part of an alcohol provider” and “states the fundamental elements of any claim against an alcohol provider relating to damages caused by the intoxication of the person to whom the alcohol was furnished.”[11]

b.     Foreseeability of Harm and Duty To Third Parties Under the Dram Shop Act       
 The prescribed duty is one of omission; a furnisher is to refrain from serving alcohol to a person he or she knows to be visibly intoxicated.”[12]  It has been held:

"The Dram Shop Act represents a legislative judgment and the declared public policy of this state that providers of alcoholic beverages should be liable for the reasonably foreseeable consequences of knowingly serving visibly intoxicated persons."[13]

Contrary to the common law, that legislative judgment now controls the elements of foreseeability and duty.  That is, harm to third parties is only foreseeable when the defendant knows the person served is visibly intoxicated, and breach occurs when they continue to serve despite that knowledge.  Only upon visible intoxication can a third-party Plaintiff’s injuries be foreseeable to the defendant furnisher, and only then would the Defendant have a duty to the third-party Plaintiff. 

The immunity provided in the Dram Shop Act was a departure from the common law’s duty of reasonable care in such cases.  Now:

“[Civil] liability for negligence in the provision of alcoholic beverages … is restricted to cases involving the breach of a statutory duty. Here, the applicable statutes are Indiana Code sections 7.1-5-10-15 and 7.1-5-10-15.5.”[14]

 “The duty to conduct oneself to avoid harm from another person's intoxication is embodied in Indiana's Dram Shop Act.”[15]  “[W]hether a legal duty is owed by one party to another is generally a question of law for the court to determine.”[16] Thus, duty under the Dram Shop act is ripe for resolution on summary judgment under the proper facts.

c.      Chances of Success on Summary Judgment in Dram Shop Cases

Absent evidence to infer that the AIP was visibly intoxicated when served, such matters can be resolved as a matter of law on summary judgment.     That was the holding of the Indiana Supreme Court in Delta Tau Delta v. Johnson.[17]  Delta held that:

“Where … there is insufficient evidence to support actual knowledge [of visible intoxication], the issue may be resolved as a matter of law.”[18] 

In Delta, the Indiana Supreme Court explained the process for determining when summary judgment is appropriate on the issue of actual knowledge of visible intoxication pursuant to the Dram Shop Act:

“The first step … is to determine whether the person furnishing the alcohol had actual knowledge that they were furnishing alcohol to an intoxicated individual. The furnisher's knowledge must be judged by a subjective standard. Absent an admission that the person furnishing alcohol had actual knowledge of the other's intoxication, the trier of fact must look to reasonable inferences based upon an examination of the surrounding circumstances. Actual knowledge of intoxication can be inferred from indirect or circumstantial evidence such as ‘what and how much the person was known to have consumed, the time involved, the person's behavior at the time, and the person's condition shortly after leaving.’  Where, however, there is insufficient evidence to support actual knowledge, the issue may be resolved as a matter of law.”[19]

In Delta, the AIP had 4 or 5 beers and hard alcohol, admitted he was intoxicated and the needed to “sober up,” and witnesses testified “he may have been more talkative than usual…”[20]  The Supreme Court held such evidence insufficient to infer visible intoxication: “…even if one assumes that a member of DTD furnished [him] with alcohol, there is no evidence [he] exhibited visible signs of intoxication for a pledge to notice.”[21] Since there was no visible intoxication, there was no duty to the third party, and summary judgment was appropriate. 

Similarly, in Muex v. Hindel Bowling Lanes, the court affirmed summary judgment for a bowling alley where a patron who was injured by another patron brought suit against the establishment under the Dram Shop Act.[22]  Although all patrons had to obtain beverages at a single window station, the only evidence concerning the amount of beer served was that the pitchers were empty and then full during the evening, there were no complaints regarding patrons' behavior, and there was no evidence that any patron was intoxicated.

IV.           The Dram Shop Act: Under Attack

Unfortunately for furnishers of alcohol, Indiana’s courts regularly find ways to narrow the legislative immunity provided by the Dram Shop Act.  Although the “actual knowledge” of visible intoxication standard is a subjective one, case law repeatedly holds that the fact finder may infer the server had actual knowledge of the AIP’s visible intoxication from the surrounding facts and circumstances.  This is true even if the intoxicated behavior occurred outside of the presence of the server or even hours later off the premises. 

This seems to run counter to legislature’s intent “that providers of alcoholic beverages should be liable for the reasonably foreseeable consequences of knowingly serving visibly intoxicated persons."[23]  Rather, the current status of the law appears to be that servers can potentially be held liable for unforeseeable consequences of unknowingly serving a person that is later discovered to be intoxicated. 

Motions for summary judgment have been repeatedly denied if there is any factual support that the patron exhibited any sign of visible intoxication in the time frame surrounding service.  It often doesn’t matter if this behavior occurred outside the view of the server, or even several hours after being served.  Factual inferences of visible intoxication have been found based upon patron behavior in the surrounding timeframe, witness testimony, amount consumed, toxicological evidence, expert opinion, later police observations, and similar evidence, even when there is no evidence the server actually knew the patron to be visibly intoxicated.

a.     Actual Knowledge Inferred by Amount Consumed and Other Witness Observations

In Elsperman v. Plump (a case decided before the Dram Shop Act), it was held the fact finder may consider the patron's alcohol consumption prior to his visit to the tavern (even if unknown to the server), his behavior in the tavern, the amount of alcohol he consumed while there, the time period involved, and the state of intoxication he exhibited after leaving the tavern.[24]  

The “totality of the evidence” can include “the amount of alcoholic beverages consumed, the loud and boisterous conduct, the coughing spell and staggering to the bathroom, the offer of [a friend] to drive [the patron] home, the admission of [the bartender] that [the patron] was a ‘little intoxicated’, the fact that [the bartender] followed [the patron] out and observed him drive away, and [the bartender's] admonition to [the friend] to keep his mouth shut.”[25]
 
b.     Toxicologist/Expert Opinion

Expert opinion may also be used to support or oppose visible intoxication.  Most toxicologist agree that a BAC of .15% will give rise to an factual inference of visible intoxication in most adults.  In Booker, Inc. v. Morrill, the bartender and witnesses testified that the patron did not appear intoxicated.  However, evidence that he drank eight to ten beers and three shots over a four-hour period and the expert’s opinion that the AIP’s .21% BAC would give rise to an inference of visible intoxication, was sufficient to give rise to an inference that the bartender had actual knowledge of visible intoxication.[26]

V.              The Future?  Can Odor of Alcohol on the Breath Be Visible Intoxication?

In 2015, Buchanan v. Brad’s Gold Club held for the first time that the odor of alcohol on one’s breath can constitute “visible” intoxication.[27]  One can quickly see the problems such a holding could cause.  

By definition, an odor is not visible.  One cannot see an odor.  If upheld, the this ruling potentially eviscerates the Dram Shop Act’s immunity and could arguably be seen as automatically imposing a duty to third parties upon furnishing the first drink.  Put simply, every person that takes a sip of alcohol will have some odor of that alcohol on their breath, and as that alcohol is metabolized, it is excreted through the breath.  Odor has nothing to do with a person’s level of impairment or visible signs of intoxication.

The BAC of the AIP in that case was undisputedly well below the .15% standard for inferring visible intoxication, and experts found the AIP’s BAC to be .063% at the time of service.  There was no evidence of visible intoxication before, during, or after being served.  The evidence revealed that the AIP was later found to have alcohol on her breath.  Regardless, the Appellate Court held:

“Although [the AIP] did not fail any sobriety tests or exhibit any other indicia of visible intoxication, we find that whether it may be inferred from the BAC and the odor of alcohol that BGC had actual knowledge that [the AIP] was visibly intoxicated at the time she was furnished alcoholic beverages is a matter best left for the trier of fact.”[28]

            This holding is currently pending petition to transfer to the Indiana Supreme Court, and the story is likely not over for this case.

VI.           Conclusion and Tips
Liability in these cases often depends on witness observations, police evidence (in the related criminal matter), and toxicological evidence.  Anyone defending or prosecuting a dram shop claim should always analyze the following issues, and obtain the following evidence as soon as possible:
1.     Take recorded witness statement from anyone that observed the AIP in the timeframe surrounding the accident or service.
2.     Obtain a complete copy of the criminal file, including all reports, photos, videos, interviews, affidavits, police observations, and pleadings.
3.     A blood draw was likely taken, and the complete toxicological file should be obtained (if not already in the police file).
4.     Obtain copies of all receipts and server tickets from all dram shops visited.
5.     Obtain credit card records for the AIP and anyone that bought alcohol for the AIP.
6.     Alcohol treatment records for the AIP.  Did the AIP have a good deal of experience with alcohol?
7.     Nonparties and comparative fault:  Fault can be apportioned to the Plaintiff, the AIP, and anyone that bought a drink for the AIP.  Most juries will put the majority of fault on the drunk driver.
8.     Retaining a toxicologist early should be considered in most cases.


[1] Elder v. Fisher, 247 Ind. 598, 604, 217 N.E.2d 847, 851 (1966).
[2] Annotation, Common-Law Right of Action for Damage Sustained By Plaintiff in Consequence of Sale or Gift of Intoxicating Liquor or Habit-Forming Drug to Another, 97 A.L.R.3d 528, 533 (1980). See also 45 Am. Jur. 2d Intoxicating Liquors § 553 (1969).
[3] 247 Ind. 598, 607;  217 N.E.2d 847, 853 (1966).
[4] Whisman v. Fawcett, 470 N.E.2d 73, 80 (Ind. 1984).
[5] 519 N.E.2d 1224 (Ind. 1988).
[6] 519 N.E.2d 1217 (Ind. 1988).
[7] Burns Ind. Code Ann. § 7.1-5-10-15.
[9] Baxter v. Galligher, 604 N.E.2d 1245, 1247 (Ind. Ct. App. 1992).
[10] I.C. § 7.1-5-10-15.5, emphasis added.
[11] Buffington v. Metcalf, 883 F. Supp. 1190, 1193 (S.D. Ind. 1994).
[12] Pierson v. Serv. Am. Corp., 9 N.E.3d 712, 716 (Ind. Ct. App. 2014). 
[13] Id.  Also see Vanderhoek v. Willy, 728 N.E.2d 213, 215 (Ind. Ct. App. 2000).
[14] Vanderhoek at 216.
[15] Pierson v. Serv. Am. Corp., 9 N.E.3d 712, 715 (Ind. Ct. App. 2014). 
[16] Id. 
[17] 712 N.E.2d 968, 974 (Ind. 1999), abrogated in part on other grounds.
[18] Id. 
[19] 712 N.E.2d 968, 974, 1999 (Ind. 1999), abrogated in part on other grounds, internal citations omitted. 
[20] Id. at 970; 974-975. 
[21] Id. at 975. 
[22] Muex v. Hindel Bowling Lanes, Inc., 596 N.E.2d 263 (Ind. Ct. App. 1992).
[23] Id.  Also see Vanderhoek v. Willy, 728 N.E.2d 213, 215 (Ind. Ct. App. 2000)
[24] Elsperman v. Plump, 446 N.E.2d 1027, 1031 (Ind. Ct. App. 1983).
[25] Id.
[26] Booker, Inc. v. Morrill, 639 N.E.2d 358 (Ind. Ct. App. 1994).
[27] BGC Entm't, Inc. v. Buchanan, 2015 Ind. App. LEXIS 549 (Ind. Ct. App. Aug. 5, 2015).
[28] Id at 18.