If South Carolina Can Mandate Liquor Liability Insurance, Why Can’t Texas?

Michael GrossmanOctober 09, 2017 5 minutes

Good news, South Carolinians! Legislators in your state passed a law in June requiring bars and restaurants that sell alcohol past 5 p.m. to have liability insurance policies of at least $1 million. Under the new law, these businesses will need to show proof of such a policy before they are able to obtain or renew their operation licenses. That may not sound like it affects your day-to-day life much, but for many of it you it applies more than you may think. The new law is an important measure to aid people injured by drunk drivers.

The legislation was enacted as a direct response to the severe injury of Dillon police officer Jacob Richardson, who was struck by a drunk driver. Richardson was left paralyzed and brain damaged, but the club the driver had left prior to the accident was uninsured, passing the burden of paying for the officer's care to the city. The South Carolina Association for Justice and Richardson's family were understandably upset by the bar's evasion of liability and lobbied successfully to hold vendors to a higher standard going forward.

Dram Shop Rules, But No Dram Shop Act

While the recent law in June was known as the "dram shop bill," South Carolina doesn't actually have a formal dram shop act like many other states, including Texas. Bills like the new insurance mandate tiptoe around the edges of a formal dram shop bill, but so far the Palmetto State mostly treats the symptoms of the drunk-driving disease through common law. Even without comprehensive legislation, though, SC state courts have historically allowed third-party injury claims against bars and restaurants that over-served a patron who then injures or kills someone while driving drunk. They allow plaintiffs to seek remedy through actions coming from negligent violations of criminal statutes.

Another difference between South Carolina and Texas dram is the standards used to define a bar staff's over-service. Here in the Lone Star state, the law requires a bar to stop serving a customer who is visibly intoxicated, meaning that he must show obvious signs of drunkenness (slurred speech, balance and motor control, difficulty remaining conscious) before the bar is required to stop serving him. This leads an uncomfortable amount of wiggle room for bars to suggest that a patron could simply hold his liquor well, functioning convincingly long after he should have been cut off. While S.C. Code Ann. § 61-4-580(2) similarly prohibits the sale of alcohol to an intoxicated person, its language doesn't include a "visible intoxication" requirement. Instead, servers must use a different manner of assessing how drunk patrons might be.

In 2010 during Hartfield v. Getaway Lounge & Grill, Inc., the state's Court of Appeals interpreted its statutes to mean a plaintiff must establish only that alcohol was served to a customer whom the server or bartender knew or should have known was intoxicated. With responsibility defined this way, the serving establishment must keep a careful eye on a given patron's drinking habits. For instance, if a patron chugs four beers in an hour, a server ought to know that he shouldn't be served anything further lest he become intoxicated beyond the state's legal limit. Even if the patron seems fine, it's in the server's best interests not to provide him any more alcohol based on that understanding.

Combine this elevated awareness with the state's shiny new liquor liability insurance requirements and it looks like South Carolina is slowly progressing toward passing a codified dram shop act. Of course, in the meantime I'd like Texas lawmakers to take a good look at the measures they have adopted, and consider implementing them as well.

Take Note, Texas

Texas dram shop law is already very useful for holding bars and restaurants accountable for over-service, but as helpful as it has been for people injured by drunk drivers, South Carolina's laws show how there's arguably room for improvement in the Texas Alcoholic Beverage Code.

Let's contrast these Carolinian laws against their related Texan dram shop statutes:

  • South Carolina's "should have known" standard appears to require more from bar service staff than Texas' "visible intoxication" rules. Given a choice, I think most people would prefer to be cut off based on a logical inference about how much they've had to drink, rather than waiting until they're wobbly-kneed, nauseous, and incoherent. Requiring bartenders and servers to keep an eye on how many drinks they've brought to a customer doesn't seem that onerous either, as they have to ring up each successive drink anyway. A simple glance at their point-of-sale screen should show them it's probably not a good idea to serve someone a third Boilermaker in the same half-hour period. There may be money in bringing another one anyway, but if that customer might get too drunk to drive and hurt someone, it absolutely isn't worth doing.

    Empowering trained bar staff to stop a patron before disaster has a chance to strike is preferable to waiting until evidence points to it being too late. By the time of "visible intoxication" most people aren't in any shape to drive, and bars don't exactly have a drunk tank to sleep it off. In compliance with TABC regulations, they hustle those pickled people out the door at 2 a.m. sharp and close their doors, leaving the patrons to make some pretty tough choices (which many of them will make incorrectly).

    Of course, any rule is only as good as the people who are meant to use and enforce it, so naturally some carefree servers would still find a way to abuse the "should have known" system. I could see someone arguing that the pace of business prevents them from counting up someone's drink orders; on a hectic Saturday, who has the time? That's where the second, newer measure comes into play, and it's a doozy.

  • The recent measure motivated by Officer Richardson's tragic situation seems as though it'll be a helpful check on over-service. Unless they are chains owned by larger firms, bars and clubs often form as limited-liability corporations (LLC) and seldom have major liquid assets in the event of a lawsuit. If sued they declare bankruptcy, scuttle the business, and re-form under a new name, leaving the plaintiff with a judgment requiring a defunct business to provide them with compensation. Recall that the club that over-served the drunk driver who hit Richardson had no insurance and was allowed more or less to shrug its way out of paying anything to the victim, requiring the city of Dillon to pay in the neighborhood of $1 million for his care. The new insurance requirements should remedy that problem; if every bar has to be insured, victims won't be out of luck if something terrible happens.

    Alas, Texas has no such program, meaning that some plaintiffs are left in the cold when it's time to recover damages from the bars that turned a liquored-up driver loose on the tollway. It's not a foreign concept to the state's leaders; it has been apparent since shortly after the 1987 passage of the Texas Dram Shop Act that liquor liability insurance would be an important asset for consumer protection. As recently as 2015, the legislature proposed Bill 409, the "dram shop liability" bill, which would have dealt with this specific issue. Intense push-back from the liquor industry defeated the bill before it could be passed, and consumers are still not protected from broke bars.

    To be fair, many Texas bars actually do carry liability insurance, in an effort to do the right thing. As with most situations involving a large groups, it's really the bad apples spoiling the bunch that concern me and the public at large. Some bar owners see an extra cost that will affect their bottom lines and choose to forego it. More scrupulous bar and restaurant owners buy into insurance policies, but are sometimes tricked by insurance companies into creating policies that will only pay out if the bar is able to successfully invoke a Safe Harbor defense in court. Put another way, in those cases insurers are only willing to pay once they won't have to.

What Is the Takeaway?

South Carolina may not have an official dram shop act, drafted by lawmakers and signed by the governor, but it's clear that its citizens and legislators recognize the value of protection from drunk drivers and reckless bars. If they create more and more legislation in this vein to drill down on the problem of over-service, presumably they'll eventually revise their Code of Laws to include a full suite of rules for dram shops.

In the meantime, states that already have such acts--like Texas--shouldn't rest on their laurels. There's room for improvement in the Lone Star State's dram shop laws, and South Carolina's "should have known" intoxication standard and its requisite million-dollar liquor liability insurance policies are useful ideas for Texas legislators to consider.