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Holiday Parties Involving Alcohol a Major Liability, Experts Warn

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Featured Solutions: Casualty (Commercial)

Nearly 57% of companies will host an in-person holiday party for their employees this year, an increase of over 26% from 2021, according to a new survey. The 2022 Holiday Party Survey Report, released Dec. 2 by executive outplacement firm Challenger, Gray & Christmas, was based on responses from 252 U.S. companies and also noted that more than 42% of employers would have a holiday party after one or more years of not hosting one, CNBC reported.

It is one of multiple indications of a more active year for large holiday gatherings, from lavish employer-sponsored events with million-dollar-plus budgets to more subdued offerings and even a return to celebrations at the White House. However, the festive season may also be the most hazardous time of year for the businesses that host these events due to potential liquor-related liability, said Kyle Lacertosa, Underwriter, Commercial Insurance, Burns & Wilcox, Parsippany, New Jersey.

“Most corporate offices have some sort of holiday get-together, and alcohol is definitely a factor in many of them,” Lacertosa said. “It is definitely an increased risk, and probably the biggest exposure for businesses at this time of year.”

These holiday festivities involving alcohol can lead to lawsuits, whether due to physical altercations, injuries, drunk driving accidents or other incidents. “They really need to protect themselves,” he said. “If there is an accident, there are many different individuals who could potentially sue them. For a small business, the effects can be devastating.”

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Liquor claims can be extremely complex, especially because many losses can end up being full-limit losses. If you have a serious injury or death that is caused by drinking and driving, it can become a catastrophic loss for all involved parties.

Serious financial losses are possible, and employers may find that their Commercial General Liability (CGL) Insurance specifically excludes alcohol-related claims or that they need Special Event Insurance to cover their gathering. Establishments that serve alcohol and host these parties, meanwhile, will need Liquor Liability Insurance.

“Liquor claims can be extremely complex, especially because many losses can end up being full-limit losses,” said Jackson Hastings, Underwriter, Commercial Insurance, Burns & Wilcox, Charleston, South Carolina. “If you have a serious injury or death that is caused by drinking and driving, it can become a catastrophic loss for all involved parties.”

Understanding the risks

Individuals are more likely to drink beyond their usual limits during holiday celebrations, according to the National Institute on Alcohol Abuse and Alcoholism. In 2021, 7 in 10 respondents to a survey by Ritual Zero Proof believed too much alcohol is served at holiday office parties, and 56% said they have been worried about being fired after the events.

Drunk driving deaths in the U.S. have been on the rise in recent years, with the National Highway Traffic Safety Administration reporting 11,654 alcohol-impaired driving traffic deaths in 2020 — a 14% increase in deaths compared to 2019. Drunk driving is the leading cause of criminal death in Canada, where around 1,500 individuals are killed in alcohol-related crashes each year, Postmedia Network’s Driving.ca reported in 2021.

If one of these tragic accidents occurs after a work-sponsored holiday event, the establishment where the party was held could be sued, in addition to the company that planned the party. Based on a court ruling in 2013, an employer that hosted a holiday party could even be held liable after an employee returns home safely but then drives while intoxicated later that night, the San Diego Union-Tribune reported in 2021.

“If you are having your party at a restaurant, those claims are likely going to be tendered to the establishment, but what is most likely going to happen is everybody will be dragged into the lawsuit at one point,” Lacertosa said, pointing to possible litigation due to overserving guests or fights that break out among intoxicated patrons. “Someone who saw the fight could even claim emotional damage.”

Liquor Liability Insurance can help cover the cost of legal defense, third-party personal injury, property damage, and more. “There are just astronomical costs and the more individuals involved, the more likely it is going to be a very hefty lawsuit,” he said.

Without insurance, a liquor liability claim can be “extremely detrimental” to a company, Hastings said. “A lawsuit against them could be very costly and take a long time to resolve,” she said.

Companies should check for insurance exclusions, take precautions

In a 2019 survey by American Addiction Centers, just 47% of companies that planned to host a holiday party intended to regulate alcohol consumption among guests, and one-fifth of workers reported that they had binge drank at a company holiday party in the past. It is no surprise that these situations sometimes get out of control, Lacertosa said.

“Holiday parties call for celebrating and gathering and many individuals enjoy eating and drinking for free. Employees are also bringing their spouses, who the company may not affiliate with every day,” he said. “The risks go up substantially.”

With the risk of injuries, auto accidents, physical altercations and other possible outcomes in mind, it is important for both employers and alcohol-serving establishments to take all possible safety precautions and review their insurance options before hosting an event. Not all Liquor Liability Insurance policies will include coverage for assault and battery, for example, Lacertosa pointed out.

“Assault and battery is a very expensive endorsement for the policy, but it is a huge thing they need to look out for on an insurance policy,” he said. “There are just so many things to look out for and it is so important to have a really professional and knowledgeable wholesale insurance broker involved.”

Initiating that conversation with an experienced broker is essential, Hastings advised. “The most important thing is that when companies are looking at hosting an event like this, they should review their current coverage with their broker and ensure they are protected,” she said. “The insured can describe the planned event, how many attendees will be drinking, how alcohol will be served, and find out how that can be covered by insurance and the measures they should take to mitigate any type of loss.”

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The most important thing is that when companies are looking at hosting an event like this, they should review their current coverage with their broker and ensure they are protected.

While bars and restaurants will almost always need a Liquor Liability Insurance policy due to a “total liquor exclusion” on most CGL Insurance policies, corporate offices and other workplaces should ask their insurance broker about whether liquor liability is included in their CGL Insurance and if they need to purchase Special Event Insurance for the type of holiday party they have planned.

“There could be a situation where the premise is covered and there is no exclusion, but it is really a case-by-case basis,” Lacertosa said. “If they do have an exclusion, the business can take out a short-term Special Event Insurance policy that can just designate those dates and include the liquor coverage. This is very much the season for that and a lot of offices have done that recently.”

Liquor risks may escalate as marijuana use becomes more prevalent

One possible addition to holiday parties could further complicate the risk landscape for employers. Recreational cannabis is legal in 21 states, according to U.S. News & World Report, and the National Institutes of Health reports that the proportion of U.S. young adults who used marijuana in the past year grew to a record-high of 43% in 2021. More individuals using cannabis products could make it increasingly difficult for bartenders to identify those who should not be served alcohol, Lacertosa said.

“Marijuana is going to be a huge change in the industry because establishments may not know what to look out for,” he said. “That is definitely going to go hand-in-hand with the liquor liability and will cause more problems and more claims, because marijuana can substantially enhance the effects of alcohol.”

At least one marijuana-infused beverage company is currently promoting its cannabis drinks for holiday season gatherings, Forbes recently reported. The overall trend of increased cannabis use may also heighten the risk taken on by bars, restaurants and caterers. A catering company in Florida was recently sued for reportedly serving marijuana-laced food at a wedding, causing injuries among guests, Fox News reported in late November.

“Time will tell, but it is likely going to be significant,” Lacertosa said of the potential liability associated with the growing prevalence of marijuana, noting that some insurance carriers may eventually implement marijuana exclusions on policies. “It depends on the state. To be protected, you have to train your staff, but you are still relying on others. To have that ease in the back of your mind, you really need insurance.”

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[Transportation] is an added cost, but you know they are getting home safe from a sober driver, and they are not drinking and driving, which is probably the No. 1 case in liquor liability lawsuits.

Although Lacertosa said he is aware of some companies that have canceled holiday parties or taken them off-site to help reduce their potential liability, many companies are anxious to celebrate, especially with more employees working remotely. “It is nice to see everybody’s face, but I have heard of cases where companies are just doing a virtual holiday party, where everybody can log in from their computer — they may have a bottle of wine at their house, and it is basically like you are there,” he said.

For companies that host in-person events, “know who you are inviting,” Lacertosa suggested, and be cautious about inviting entire families. Those hosting the gathering should also be trained on alcohol awareness and know how to spot guests who may be intoxicated and should not be served. “Every situation is going to be a little bit different, but they should familiarize themselves with that alcohol awareness,” he said.

It is best to hire a professional bartender who is TIPS-trained versus self-serve setups, and Ubers or taxis should be made available to attendees, Hastings and Lacertosa agreed.

“Yes, it is an added cost, but you know they are getting home safe from a sober driver, and they are not drinking and driving, which is probably the No. 1 case in liquor liability lawsuits,” Lacertosa said. “At the end of the day, with inflation, it is an increased cost in the short term, but could prevent large losses and litigation costs in the future.”

 

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