Social Host Hangover

When you throw a party at your house where does your legal obligation to monitor alcohol consumption and reasonably foresee risk begin – and end? If one of your intoxicated guests leaves in a car and causes an accident, are you responsible for failing to take the keys, call a cab or offer a bed for the night? Who should be held liable and pay for catastrophic injuries and deaths resulting from the scourge of impaired driving?

The Supreme Court of Canada is currently wrestling with all of these questions, after oral arguments were heard January 2006 in a landmark social host liability case, Childs v. Desormeaux. The insurance industry is closely watching the case, which could change the face of how homeowners insurance – the ultimate payer of social host liability in many cases – is designed and sold in Canada.

CHILDS V. DESORMEAUX

According to the facts established in the lower courts, on Dec. 31, 1998 Julie Zimmerman and Dwight Courrier, the social hosts, held a New Year’s Eve party at their home. Desmond Desormeaux attended along with his girlfriend and another friend. Since this was a bring-your-own-booze party, they brought with them a case of 24 beers, a bottle of Amaretto and a bottle of wine. They arrived together and left together, with Desormeaux as the driver.

On Jan.1, at about 1:30 a.m., shortly after leaving the party, Desormeaux’s vehicle was involved in a head-on collision with another vehicle carrying a driver and four passengers. One passenger was killed, another passenger, Zoe Childs, was left a paraplegic and the other two were seriously injured. A test showed Desormeaux’s blood alcohol concentration was 183mg/100ml, more than double the legal limit.

Childs and her family sued both Desormeaux and the social hosts, Courrier and Zimmerman. Desormeaux had no auto insurance and did not defend the action; he was therefore found responsible. The issue at trial was solely whether the social hosts were responsible along with Desormeaux.

The Insurance Bureau of Canada (IBC) acted is an intervener in the Supreme Court review of the case. “This is an important decision,” IBC vice president and general counsel Randy Bundus says. “We expect the Supreme Court will write their decision in a way that provides guidance to the lower courts and to society as a whole as to what the expectations are of social hosts.”

“We see this as a poster child case for social host liability,” Robert Solomon, a professor of law at the University of Western Ontario, says. Solomon is a legal consultant for Mothers Against Drunk Driving (MADD) Canada, the other intervener in the Supreme Court case. “Desormeaux was a known alcoholic for 20 years and the (social host) was his best friend. He knew he drank and drove, he knew he had a number of accidents, he knew he was irresponsible. This is not rocket science.”

According to Greg Somerville, executive vice president, claims and reinsurance for Aviva Canada, it is notable the Supreme Court of Canada – which has a full docket and selects only those cases it deems to be of national importance – agreed to hear the case in the first place. “Clearly, they have something to say on the matter, and the insurance industry is going to be watching carefully to see how they come up with the judgment,” Somerville says.

Solomon notes the scope of alcohol-related liability has expanded dramatically in Canada over the past 25 years. The number and types of civil suits against alcohol providers and others who are responsible for intoxicated drinkers have increased significantly across Canada – particularly in Ontario, Alberta and British Columbia. Although much of this activity is related to commercial providers or organizations, social hosts have also been a target of litigation.

NEW GUIDELINES

In Childs v. Desormeaux, many feel the issue of social host liability has reached a turning point. Those watching the issue say new guidelines are required as to when or if private hosts are responsible for injuries caused by their guests to other persons. The extent of the problem is highlighted by the fact that most alcohol in Canada is consumed in homes, according to a national survey conducted by the Canadian Centre on Substance Abuse. It found home consumption accounts for the greatest share of total drinking, while licensed establishments account for approximately one-fourth of consumption.

The facts of the Childs v. Desormeaux case illustrate some key issues that muddy the waters of social host liability. For example, is there a duty of care among adults who have no commercial or “paternal” relationship, such as server-patron or parent-child? What if the social host does not supply or serve alcohol, but merely provides the venue for a party? Does knowledge of a person’s drinking history compel the host to monitor consumption? Is the social host aware (or ought to be aware) that a person is intoxicated and may operate a vehicle? Are any reasonable efforts made to prevent this from happening?

In Childs v. Desormeaux, Ontario Superior Court Justice James Chadwick found that the social hosts owed a duty of care based on the facts of the case. But he refused to expand the tort law because of policy reasons. After reviewing what other jurisdictions have done, he concluded that a finding of social host liability in this case would create a novel tort. Justice Chadwick could find no good reason to expand the law to include social host liability, and dismissed the claim.

The judgment was appealed to the Ontario Court of Appeal, which rendered its decision in May 2004. The Court of Appeal found the social hosts did not owe a duty of care to Childs and dismissed the appeal. However Ontario Court Appeal Justice Karen Weiler, writing for the majority, did leave the door open for possible future legal action against social hosts.

“While I would hold that no duty of care arises in the circumstances of this case to third party users of the road, I would not exclude from future consideration the imposition of a duty of care upon a social host,” Weiler wrote. “Depending on the circumstances, a social host may be implicated in the creation of the risk to users of the road, especially if the social host knows that an intoxicated guest is going to drive a car and does not make reasonable efforts to prevent the guest from driving.”

Shelley Timms, president of Timshel Services and an expert in liquor liability and risk management issues, says the Appeal Court “has not provided a great deal of clarity on this (social host) issue.” In fact, she says, the decision has created uncertainty about the future direction of social host liability, which may have prompted the Supreme Court of Canada to weigh in on the subject. Sources expect a decision sometime this year, possibly by spring.

OPENING THE FLOODGATES?

Insurers believe a finding of social host liability will open the floodgates of litigation. IBC’s submission to the Supreme Court noted “the introduction of social host liability is likely to result in a proliferation of lawsuits, as social hosts will be added as parties in tort claims against intoxicated drivers as a matter of course.” In particular, the IBC submission held, the law of joint and several liability could lead to social hosts – and their insurers – being on the hook for 100% of settlements.

“One of the main concerns from the insurance perspective is that if the courts allow this law to develop on a case by case basis, many of the actions would be started just to get at the insurance money available,” Bundus says. “The duty to defend alone will be expensive even if it turns out the social host had no liability.”

Others say any finding of social host liability will involve a fairly narrow duty of care. “The only time that duty is owed to third party users of the road is when you know or ought to know they are intoxicated or you know they are going to drive,” Solomon says. “That is why we say it is a narrow duty cast on hosts in terms of li ability. Just because you have an alcohol-related event on your property does not mean you are liable.”

In terms of forecasting a big spike in lawsuits, Solomon is not buying it. “We are not talking about lots of cases,” he says. “In terms of joint and several liability, you are never going to get one of these claims unless there is a catastrophic injury. Let’s be realistic; I am not going to sue some third person at a narrow duty of care.”

In Canada, there have been many commercial host liquor liability cases; several court decisions have held that bars, restaurants and taverns owe a higher standard of care. As much as the courts disapprove of the consequences of excessive drinking, they are clearly reluctant to place the duties of commercial hosts on people serving or allowing the consumption of alcohol in their own homes. Cases like Baumeister v. Drake (1984) and Haggarty v. Desmarais (2000) demonstrated this reluctance to impose liability on private hosts.

In their Supreme Court submission, lawyers representing Childs argue that social host liability is a logical extension of commercial host standard of care. Insurers strongly disagree with this notion. “There is an important difference between the social host and the commercial establishment, in which bartenders are expected to have training on the serving of alcohol,” Steve Loncar, the claims customers management director at Royal & SunAlliance Canada, says.

“Should the court deem there is a liability attached to social hosts, there will be a significant challenge in assessing and measuring risk,” Somerville adds. “With commercial clients, you can underwrite a specific risk according to volume of sales, type of establishment, training and serving practices, loss history and risk management programs. But measuring this risk on the homeowner side borders on the impossible. It would be very difficult to determine what kind of a risk an individual homeowner presents.”

“There would be a lot of people paying more than their fair share for this new exposure, because we can’t tell in advance if you are a good or bad risk in terms of hosting a party,” Bundus says. “It would be an added cost to the homeowner, and how much is difficult to predict. The money for these claims has to be found somewhere.”

“If I am shopping for a quote on a homeowners policy, I am looking at protecting my home and considering issues like replacement costs,” says Loncar. “I am not thinking about the liability of acting as a social host.”

Solomon contends that insurers already assume some general risk in homeowner policies for occupier’s liability. “I don’t see any need to separately assess whether a homeowner is a good or bad social host,” he says. “There are all kinds of things the industry doesn’t take into account in setting premiums, such as hosting a birthday party with five-year-olds coming over to your house. This is something within the general risk they calculate into costs.”

LIABILITY AS DETERRENT

Solomon is skeptical about the insurance industry’s motivation in the Childs case. “Do I think insurance companies tend every time there is a high-liability case to exaggerate its impact in an effort to justify higher premiums? Yes, I do,” he says. “In fact, I think they took a position that is contrary to their financial self-interest. Sometimes I think an organization like the IBC . . . looks at the short-term view, as opposed to saying: ‘Anything that encourages people to consume alcohol more responsibly is going to dramatically decrease our liability and costs.'”

Timms believes insurance companies are rightfully leery of the potential exposures that social host liability represents. But, she adds: “It always concerns me when I hear the insurance industry talk like these cases could be the worst thing. We are making inroads on the issue of liquor liability overall. For impaired driving, something like social host liability could actually help by acting as a deterrent. Anti-drinking and driving groups use liability as a social hammer. If they don’t have that, they have lost a major weapon in their education. It is something for the insurance companies to think about seriously.”

In its submission, the IBC points out that claims of social host liability acting as a deterrent are “speculative” and that “MADD’s own position papers concede that it is difficult to assess the deterrent effect of social host liability until such liability becomes well-established.”

But Bundus says one of the industry’s main concerns is that if making drinking and driving a criminal offence won’t act as a deterrent, how would making the social host liable in a tort action do it? “If we knew this was going to deter drinking and driving, we would not have taken the position we did,” Bundus said. “We just weren’t sure it was going to have that effect.”

“We know that some people are badly hurt or killed in impaired driving collisions, and these are tragic cases,” Bundus goes on to say. “But what is the right answer to these situations? Do we use something as inefficient as the tort system, with liability insurance overlaid on it, to make sure these people are compensated? Or, alternatively, should there be a fund for these victims that is paid on some sort of no-fault basis? We argue in our submission that they make a lot of money in the Ontario government from the sale of alcohol. Perhaps some of that profit can be set aside to deal with these types of claims.”

In fact, the IBC and its lawyers suggest that social host liability is an issue best resolved in the provincial legislatures, not the courtrooms.

“We are carefully watching what the Supreme Court does with this case,” Bundus says. “There has been a tendency of the courts to expand circumstances in which others will be held liable. We are hoping this is not going to be one of those cases.”