4 Dram shop and social host liability.(The Law and Economics of Public Health)
Publication Date: 01-NOV-07
Publication Title: Foundations and Trends in Microeconomics
Format: Online
Author: Sloan, Frank A. ; Chepke, Lindsey M.

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Description

4.1 Rationale

A substantial share of motor vehicle accidents are attributable to driving under the influence of alcohol (Levitt and Porter, 2001; Shults et al., 2001; Room et al., 2005; Quinlan et al., 2005). In 2005, an estimated 40 percent of the 39,000 reported fatal motor vehicle crashes in the United States were alcohol-related (National Center for Statistics and Analysis, 2007a,b). Of these crashes, establishments that serve alcohol for consumption on the premises, such as bars and restaurants, are often identified as the source of alcohol for the drunk driver. O'Donnell (1985) conducted a review of 11 studies and found bars and restaurants were the preferred drinking place for 40-63 percent of drivers arrested for DUI, 43-64 percent of drivers with blood alcohol content (BAC) exceeding 0.10 who participated in roadside surveys, and 26 percent of drivers involved in alcohol-related crashes.

This indicates that imposition of liability on alcohol venders can potentially have a large impact on the frequency of alcohol related motor vehicle crashes. In fact, motivated by the magnitude of the drunk driving problem, many courts and legislatures have chosen to create liability for servers, called dram shop liability. Dram shop liability gets its name from the English word dram, which refers to a unit of measure in which alcoholic beverages are served. Stores that sold alcohol in these measurements were called dram shops. Such liability imposes on alcohol servers, both on-site (bars, restaurants, etc.) and off -site (liquor stores, convenience stores, etc.) the obligation (1) not to sell alcohol products to minors and (2) to control the behavior of obviously intoxicated adult patrons of alcohol sellers so as to prevent accidents from occurring on the roadways. The seller who fails to exercise due care, as well as the drunk driver, are the potential injurers, while the injury victim has standing to sue.

Preventing minors from purchasing alcohol may take the form of examining patron identification cards before the patron can purchase alcohol. Controlling drinking behavior of adults may involve not continuing to serve an obviously intoxicated patron or finding a ride home for a patron who has had too much to drink. The intent is that with imposition of civil liability, alcohol dispensers will be forced to more closely monitor their customers' drinking. The presumption is that alcohol servers may be more efficient in monitoring drinker behavior than the drinker him or herself. Referring to imposing civil liability for alcohol servers in general and in the United Kingdom in particular, Room et al. (2005) argue that the general rule in such situations is that it is easier and more effective for the state to influence licensed occupational behavior than it is to influence the behavior of private customers" (p. 527).

The majority of U.S. states have imposed dram shop liability and a few states have imposed liability on social hosts. Examples of social hosts are a sponsor of a party at a college or a family that entertains guests at home. Social host liability is much less widespread than dram shop liability.

Dram shop and social host liability are controversial in the following sense. In general, the doctrine of consumer sovereignty has adults weighing the benefits and costs of particular decisions with such individuals being responsible for the consequences of their actions or inactions. In this context, however, the presumption is that someone else, the alcohol seller or the social host, is relatively efficient in preventing harm, and the law imposes an obligation for these parties to intercede when there is reason to believe that a third party on their premises is in a position to do harm to others. This does not absolve this third party from the obligation to exercise care, but the responsibility for exercising such care is shared.

Historically, most of the effort to control traffic accidents has been concentrated on changing drivers' behavior through police surveillance and prosecution (see, e.g., Dewees et al., 1996). At least comparatively speaking, imposing tort liability on unsafe drivers has been largely viewed a secondary line of defense.

However, there are reasons to believe that the potential of civil liability as a deterrent for motor vehicle accidents may have been underestimated. For one, under other types of regulatory regimes, such as administrative law (e.g., regulation by Alcohol Beverage Commissions) and criminal law, the victim has no incentive to supply information about the injury or the circumstances under which it occurred. Of course, there may be non-financial reasons for reporting an injury in any...



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