Tuesday, October 25, 2016

The Insurance Appraisal Process In Indiana

The Indiana Appraisal Process

Christopher A. Pearcy
Hume Smith Geddes Greed & Simmons
(317) 632-4402

I.                INTRODUCTION

Appraisal is an arbitration process for setting the value of a loss under most insurance policies.  It can be a valuable tool with an insurance company and its insured disagree over the value of the loss.  Indiana law strongly favors enforcing appraisal awards. The seminal Indiana appraisal case is Atlas Const. Co., Inc. v. Indiana Ins. Co., Inc., 309 N.E.2d 810 (1974).  In Atlas, the Court of Appeals stated:

“Generally, a court will not interfere with an appraisal award but, to the contrary, will indulge in every reasonable presumption to sustain it in the absence of fraud, mistake, or misfeasance. A court will not substitute its judgment for that of the appraisers or set aside an award for inadequacy or excessiveness unless it is so palpably wrong as to indicate corruption or bias on the part of the appraisers.”

Atlas, 309 N.E.2d 813-14 (quoting Lakewood Manufacturing Co. v. Home Ins. Co. of NY., 422 F.2d 796, 798 (6th Cir. 1970), cert. denied, 400 U.S. 827)). As a result, "one who voluntarily submits to 'arbitration' of the amount due upon a fire insurance policy, except in exceptional circumstances, is bound by the award which results from such 'arbitration' or appraisal." Id. at 814.

Nonetheless, Indiana courts "will not hesitate to set aside an appraisal award if it is tainted with fraud, collusion or partiality for appraisers...."   Id.at  813.  That's a fairly difficult standard to meet, and, indeed, it is rare to find cases where the appraisal award was overturned.

II.             THE POLICIES

In any insurance case, the policy is always the first place to look.  Appraisal provisions can vary, but are generally the same or similar to the following provision:

"Appraisal. If you and we fail to agree on the amount of loss, either may demand an appraisal of the loss. In this event, each party will choose a competent and disinterested appraiser within 20 days after receiving a written request from the other. The two appraisers will choose a competent and disinterested umpire. If they cannot agree upon an umpire within 15 days, you or we may request that the choice be made by a judge of a court of record in the state where the Insured premises is located. The appraisers will separately set the amount of loss. If the appraisers submit a written report of an agreement to us, the amount agreed upon will be the amount of loss. If they fail to agree within a reasonable time, they will submit their differences to the umpire. Written agreement signed by any two of these three will set the amount of the loss. Each appraiser will be paid by the party selecting that appraiser. Other expenses of the appraisal and the compensation of the umpire will be paid equally by you and us."

This language sets out a fairly straight forward process with certain requirements/steps:

1. Disagreement between the insurer and insured;
2. Written demand for appraisal;
3. Selection of competent and disinterested appraiser within 20 days;
4. Selection of umpire; and
5. Statement by appraisers/umpires of values.

As with all insurance cases, the words used matter. Indiana courts generally apply policy language as it is written. Tate v. Secura Ins., 587 N.E.2d 665, 668 (Ind. 1992) (stating that where "policy language is clear and unambiguous, it should be given its plain and ordinary meaning"). So, knowing what the policy requires in an appraisal should be the first order of business.


1.     Timeliness of Appraisal Demand

The requirement that there be a dispute between the insurer and the insured is rarely in dispute. However, the timeliness of the appraisal demand has been litigated.  Most policies generally don’t state a specific time for when the appraisal demand must be made.

Generally, any demand for appraisal before the insurance company has accepted coverage is likely premature.  Further, demands for appraisal occurring after the policy’s one (1) or two (2) year contractual limitations period for bring suit are generally considered too late.

Otherwise, Indiana law holds that when the policy does not "state a specified time within which demand for appraisal must be invoked, demand for appraisal must be made within a reasonable time under the circumstances of the case or the right to demand appraisal is waived." Monroe Guaranty Ins. Co. v. Backstage, Inc., 537 N.E.2d 528, 529 (Ind. Ct. App. 1989).

Waiver can be found where "(I) good-faith negotiations concerning the amount of loss ceased and (2) prejudice resulted from the delay in demanding appraisal." Id. The party challenging the timeliness of the appraisal demand bears the burden to show that prejudice resulted from the delay. Id. So, demands for appraisals should be made promptly and before circumstances can arise that may cause prejudice.

2.     Both Appraisers and The Umpire Must be “Competent” and “Disinterested”

Following the policy language above, each side is to select a "competent" and "disinterested" appraiser.  Those words are loaded with meaning, and that makes selecting the right appraiser perhaps the most important part of the process.

a.      Appraiser Competency

First, the competency requirement. Indiana has little case law on what constitutes
a "competent" appraiser in any context, much less insurance. The closest analogous case is Salin Bank & Trust Co. v. Violet U. Peden Trust, 715 N.E.2d 1003 (Ind. Ct. App. 1999). In Salin Bank, the lessor to a commercial lease had an option to purchase the property at the average price set by three appraisers, two appointed by each of the parties, and the third appointed by the parties' appointed appraisers. Id. at 1004. The Bank's appraiser, however, failed to disclose his marriage to the daughter of the Bank's chairman. Id. at 1005. That failure led the Court of Appeals to find the appraiser incompetent: "By virtue of his undisclosed personal connection with Salin, he rendered an appraisal that was not impartial, objective, or independent, and which accommodated his personal interests." Id. at 1008. As such, he could not be considered "competent," under the Uniform Standards of Professional Appraisal Practice ("USPAP"). Id. Since the Bank's appraiser was not competent, that relieved the other party from its obligation to appoint a competent appraiser. Id.  Disclosure of any relationship with the parties is therefore necessary in order to avoid questions regarding competency.

To be “competent,” the appraiser must be licensed by the State of Indiana.  By statute, all appraisals of real estate in Indiana are to be done by licensed appraisers. IND. CODE§ 25-34.l-3-2(a) (stating that "no person shall, for consideration, ... appraise real estate ... in Indiana or with respect to real estate situated in Indiana, without a license"). Moreover, a licensed appraiser is required, among other things, to pass an examination after sitting for a prescribed number of classroom hours, and to satisfactorily complete continuing education courses on various topics, including the USPAP. 876 IND. ADMIN. CODE 3-3-2; 3-3-3.1-3-3-5.1; 3-3-14 (2011); 3-5-1 (2011).  The USPAP has been adopted as law in Indiana, and licensed appraisers, as well as any broker who appraises real estate in Indiana, must comply with USPAP. Id. at 3-6-2; 1-1-43.  Thus, if the case involves appraising the value of real estate, ensuring both side's appraisers are licensed to perform such appraisals should be added to the practitioner's checklist.

b.     Appraiser must be “Disinterested”

            Questions of competence naturally spill over into impartiality, which requires that the appraisers "act free from bias, partiality, or prejudice in favor of either of the parties." Atlas Const. Co., Inc. v. Indiana Ins. Co., Inc., 309 N.E.2d 810, 813 (Ind. 1974).

“Disinterested” is further defined as “free from bias, prejudice, or partiality; not having a pecuniary interest.”  Black’s Law Dictionary (7th ed.).  “Disinterested” is synonymous with “impartial,” which is also a commonly used term in appraisal provisions.  Both terms represent a higher standard than “independent,” which is merely requires the appraiser to be "not dependent; not subject to control, restriction, modification, or limitation from a given outside source." Id. 

To avoid the appearance of partiality, insurance companies should avoid excessive use of the same appraisers, and it should never use any employee as it's appraiser.  Insurers sometimes tend to utilize the same appraisers frequently, and that can lead to the appearance of partiality. See Farmers' Conservative Mut. Ins. Co. v. Neddo, 40 N.E.2d 401,408 (1942) (noting that "[w]hile prior service of an appraiser does not disqualify him as a matter of law, the fact that such appraiser had previously been employed by either the insurer or the insured is a circumstance that may properly be considered in determining whether he is disinterested. Previous service, together with other circumstances, may disqualify"). Appointing interested or partial appraisers can also lead to additional claims for breach of contract or fraud. See, e.g.,Huber v. United Farm Family Mut. Ins. Co., 856 N.E.2d 713 (Ind. Ct. App. 2006). Put simply, it's a good idea to spread the appraisal work around.

Insurance companies should take steps to ensure that the insured’s appraiser is also disinterested.  I recently worked on a case where it was discovered that the insured’s appraiser had a majority ownership interest in the public adjusting company that was working for the insured on that same claim.  The public adjusting company had a contingency agreement with the insured, and would be paid a percentage of what the insured recovered on the claim.  Thus, the insured’s appraiser had a contingent interest in the outcome of his own appraisal.  The more he could drive up the value of the appraisal, the more revenue his public adjusting company would receive.  You can see how this would disqualify him from serving as a disinterested appraiser.

In order to ensure that the insured’s appraiser is disinterested, the insurance company can take the following steps:

·       Request any fee agreements that the insured has with its appraiser and public adjuster.  Contingency fee agreements are strictly prohibited, and reasonable hourly or flat fee agreements should be used;
·       Obtain the online corporate records from the Secretary of State for both the appraiser and public adjuster to see if there is any overlap in officers/owners; and
·        USPAP is adopted in Indiana and requires all appraisal to contain a sworn statement of impartiality.  Always double-check to ensure this is part of each written appraisal.

The requirements to be competent and disinterested also apply to umpires.  However, these umpire qualifications are rarely challenged in court because the appraisers (and indirectly, the attorneys) are the ones selecting the umpire.  If the issues surrounding the umpire are known by both sides at the time of selection, any later challenge based on known issues are likely waived.  However, umpires are subject to the same challenge if undisclosed conflicts, interests, of lack of competency were unknown at the time of selections and were only later discovered.

3.     Methods used by the Appraisers and Umpire

The appraisal process typically involves some exchange of information and documents and then one or more inspections of the damaged property. The appraisers and the umpire, if necessary, will then prepare and submit their appraisal awards. Since this is the point at which a loss is converted into a dollar figure, it's not surprising that a good bit of the case law concerns the process used to reach that figure.  In general, appraisers and the umpire are granted a large degree of deference in the appraisal methods they use.

Atlas Construction Co. v. Indiana Ins Co. is the seminal Indiana appraisal case because it deals with three important concepts in appraisal challenges. In Atlas, the insured lost a building due to fire. 309 N.E.2d at 813. The policy limited the amount payable to the "actual cash value" of the building, but did not define the term. Id. at 812.  Once the appraisal was done, the insured challenged the method used, asserting that since "actual cash value" was not defined by the policy, and the insured was entitled to submit evidence of replacement value. Id. The insured conceded that evidence of replacement value is a possible alternative factor a jury might properly consider in determining the "actual cash value" of the destroyed property- a concession that proved fatal to its argument: "Quite clearly, the mere fact that the umpire and one appraiser utilized a market value approach, rather than a replacement cost method, does not provide a basis for setting aside an appraisal award."  ld. at 814.

The Court of Appeals held that it was not permitted to set aside an award merely because an arguably permissible method was not used. Id.  Permitting re-litigation of the matter of actual cash value would subvert the purpose of appraisals in such cases. Id.

The insured's second complaint was that the appraiser it selected was not present at the meeting between the other two when the award was signed and that the "Umpire" did not merely resolve differences between the parties but rather made an independent appraisal which formed the basis of the award. Id. at 815. The court was not persuaded and held that neither failure of notice, nor absence of one appraiser from a meeting at which the other appraiser and "umpire" sign the award, are cause for setting the award aside. Id. The three had met previously, and their evaluations had been completed prior to the signing. Id. The signing of the award by the third appraiser and one of the original appraisers fully met the requirements of the law and the policy.

The insured's final issue was that the award was defective because the appraisers did not submit separate awards or list item-by-item the differences reflected in their respective appraisals. Id.at 816. The loss appraised, however, was the total destruction of a building, and the differences were as to the value of the entire building. Id. The court held there was no basis to submit differences with respect to various component parts of the structure. Id.

As shown by Atlas, Indiana courts will strongly defer to the appraisers' methodology and how they execute awards. Subsequent cases have expanded on this deference. In Ohio Casualty Ins. Co. v. Ramsey, 439 N.E.2d 1162 (Ind. Ct. App. 1982), the insurer appealed an $11,900 judgment for the insured, claiming that the trial court erred in using replacement cost as the standard of recovery under a fire insurance policy rather than actual cash value at the time of the loss. Id. at 1163. Because of "economic obsolescence" and the undesirability of the location, the insurer argued, the cost of replacement was much higher than the destroyed home's fair market value before the fire.  Id. at 1164.

The insurer further argued that replacement cost, as a method of valuation, violates the principle of indemnity upon which contracts are based, and the failure to consider depreciation in assessing damages places the insured in a better financial position than he would have been had no loss occurred. Id. at 1165.

The insured claimed the appraisal should be cast aside because, among other things, the umpire allowed the insurance company's appraiser to pick the award amount, the umpire never visited the insured's aluminum mill, and made other mistakes in his calculations. Id. at 876. At the very least, the insured argued, it should be able to explore these alleged problems at trial and, "if true," the problems would make the appraisal nonbinding.  Id.  The Seventh Circuit held, however, that the insured did not provide sufficient evidence to substantiate its claims. Id The insured’s best argument was that the umpire allowed the insurance company's appraiser to "pick" the award amount, but that allegation, standing alone, did not establish a material fact regarding the proprietary of the appraisal. Id. The fact that each of the umpire's three independent calculations were lower than those submitted by the parties' appraisers didn't help, either.

IV.            CONCLUSION

Indiana strongly favors the appraisal process, and will generally only set aside appraisal awards when there are gross violations in appraiser qualifications or the process.  Insurers and insureds must take care to carefully select competent and impartial appraisers and ensure that the appraisers do the job they are hired to do-all according to what the policy requires.  When that happens, Indiana courts will honor the result of the appraisal process.

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.