Risky Business

Would you like to see our Wine List?: Liability Stemming from the Sale of Alcoholic Beverages

By: Martin Salcedo, Esq.
Setnor Byer Insurance & Risk

In addition to serving meals, many food service establishments have become their community’s local watering hole. This can be welcome news because offering wine with dinner or serving a few cocktails during the ‘big game’ may serve to boost the bottom line. And, during these difficult economic times, the additional revenue often created by the sale of alcoholic beverages has helped keep many food service establishments financially afloat.

However, while a food service establishment’s decision to provide alcoholic beverages to its patrons may bring with it much needed revenue, the cost of doing such business is often measured in terms of increased liability exposure. Consider that according to the National Highway Traffic Safety Administration, in 2007, an estimated 13,000 people died in traffic crashes involving a driver with an illegal blood alcohol concentration. These deaths made up approximately one-third of all traffic fatalities in 2007. Needless to say, the number of traffic crashes that did not result in a fatality is significantly higher.

It is possible, if not probable, that many of those intoxicated individuals involved in traffic crashes had ‘a few drinks’ at a restaurant or bar shortly before the incident. Thus, when it comes time for the injured party’s attorney to make a list of potential defendants in the inevitable lawsuit, the establishment that served the drinks often makes the cut. And, since the establishment typically has the biggest pockets, their cut is the deepest. Court files across the country contain evidence of multi-million dollar verdicts and settlements involving establishments that served alcohol to an intoxicated individual who thereafter injured a third-party.

To understand, and ultimately reduce, the liability associated with selling alcoholic beverages to patrons, it is necessary to understand its source. Many states have enacted laws that impose liability upon the person or establishment that sells or furnishes alcoholic beverages. These statutes are commonly known as dram shop laws, and they come in many different forms.

For example, in Florida, a person “who knowingly serves a person habitually addicted to the use of any or all alcoholic beverages may become liable for injury or damaged caused by or resulting from the intoxication of such…person.” In Georgia, a person “who knowingly sells, furnishes, or serves alcoholic beverages to a person who is in a state of noticeable intoxication, knowing that such person will be driving a motor vehicle, may become liable for injury or damage caused by or resulting from the intoxication of such…person when the sale, furnishing, or serving is the proximate cause of such injury or damage.”

It is important to note that states’ dram shop laws may vary significantly, and that some states have not enacted dram shop laws. However, this does not necessarily mean that an establishment cannot be held liable for serving alcoholic beverages. Regardless of whether a state has a dram shop law, those persons injured by an intoxicated individual may be able to sue the establishment under a traditional, common-law negligence theory, which requires an establishment to use reasonable care in the provision of alcohol to patrons.

Establishments must also understand that an injury to a third-party does not necessarily have to be suffered in an automobile crash to create liability. For example, although Georgia’s statute references the likelihood of the intoxicated individual driving a motor vehicle, Florida’s does not. Thus, a third-party assaulted by an intoxicated individual may also be entitled to seek damages from the establishment that sold the alcohol to such individual.

Although an establishment’s liability in this context may come from various sources, the risk often remains the same: financial liability for damage or injury to a third-party caused by an intoxicated individual who was served alcohol within the establishment. Understanding the risk is the most effective way to reduce the risk, and, as is most often the case, understanding comes from training.

All individuals working for the establishment, from managers to employees, must be made aware of their jurisdiction’s legal requirements and must be required to abide by them at all times. It is generally advised that employees be trained how to identify the signs of intoxication in patrons and how to implement effective procedures for cutting off alcohol service when necessary; the effects of alcohol on individual behavior as well as on the ability to operate a motor vehicle safely; the methods for recognizing and dealing with underage individuals and checking ID; and the procedures for maintaining records of incidents involving underage individuals and intoxicated patrons. Employees should also be familiar with local ordinances that regulate hospitality establishments as they relate to hours of operation, alcohol service, etc.

Although the consumption of alcohol by adults is a legal activity that, when done responsibly, does not invariably lead to societal degradation, statistics do show that alcohol routinely plays a role in unfortunate, sometime tragic, instances.  In today’s society, physical damage or injury suffered by one person is often converted into financial damage suffered by another. In the context of food service establishments selling alcoholic beverages to their patrons, this may mean liability for the acts committed by an intoxicated patron.

Regardless of one’s perspective on the breadth of such liability, there are ways to limit the exposure. By implementing a policy of training and vigilance, a food service establishment may go a long way toward ensuring the continued arrival of many ‘Happy Hours’ to come.

For more information about reducing the risk of liability associated with the sale of alcohol, check out our online course entitled Alcoholic Beverage Liability: Serving Alcohol Responsibly.

Forty (Not Three) Is the Magic Number

By: Susan Nickerson
Setnor Byer Insurance & Risk, Director of Human Resources

The Equal Employment Opportunity Commission (EEOC) recently provided the nation’s employers with yet another piece of disturbing news: workplace discrimination charge filings with the EEOC soared to an unprecedented level during fiscal year 2008, which ended on September 30th. Needless to say, this is not the news many have been hoping for during these difficult economic times. In fact, it is possible that these difficult economic times may actually be responsible for these new highs (or, perhaps more accurately, new lows).

During fiscal year 2008, 95,402 charges of discrimination were filed with the EEOC. As the perspective provided by the following statistics reveals, this number is actually larger than it seems.

• Since 1996, the number of charge filings has not exceeded 85,000.

• The last time the total number of charges exceeded 90,000 was in 1994.
• The 2008 figure represents a 15% increase from 2007.
• The sheer number of charge filings in 2008 has never before been seen.

While these statistics provide insight into the current state of affairs, the reasoning behind the increase is not so easily identified. Some suggest the poor economy compels otherwise non-litigious individuals to sue their employer to survive financially. Others believe cutbacks in human resources and employee training budgets have increased the incidents of discrimination in the workplace because managers are no longer taught about the laws they must follow and HR personnel (if they remain) no longer have the resources to teach, implement, and police unlawful employment practices.

Nevertheless, at the end of the day, the reason may simply be a consequence of percentages: more people are being laid off, so more “adversaries” (i.e., former employees) are being created every day. Regardless of reason, employers must be aware of their legal obligations and their employees’ legal rights.

According to the EEOC, allegations based on race, sex, and retaliation continued as the most frequently filed charges. However, though lower in frequency, charges based on age exhibited nearly the largest annual increase of all filings. Given the consequences of an age discrimination lawsuit, this increase merits special attention to the law underlying age-based charges: the Age Discrimination in Employment Act (ADEA).

The ADEA, which generally applies to employers having twenty or more employees, makes it unlawful for an employer to:

• fail or refuse to hire, or to discharge, any individual, or otherwise discriminate against any individual with respect to the individual’s compensation, terms, conditions, or privileges of employment, because of such individual’s age;

• limit, segregate, or classify employees in any way which would or tend to deprive any individual of employment opportunities, or otherwise adversely affect the individual’s status as an employee, because of such individual’s age; or
• reduce the wage of any employee to comply with the ADEA.

At what age does an individual become entitled to these protections? Many people are surprised to discover that the protections afforded by the ADEA are limited to individuals who are at least 40 years of age. So even though 40 may be the new 30 in terms of lifestyle, in the context of the ADEA, turning 40 constitutes coming of age.

Since claims under the ADEA are on the rise, employers should be familiar with the elements of an age discrimination claim. Essentially, an aggrieved employee must establish that he or she:

• belonged to a protected age class (e.g., over 40);

• suffered an adverse employment action, such as being laid off;
• was qualified for his or her position; and
• was replaced by a younger individual.

If an employee successfully establishes these elements, then the employer must establish a legitimate, non-discriminatory reason for the adverse employment action. If successful, the burden then falls on the employee to prove that the employer’s articulated reason for the adverse action is only pretext for intentional discrimination. If necessary, these issues will be left for a jury to resolve.

Needless to say, relying on a jury to limit the consequences of an adverse judgment is not necessarily the most effective risk management technique. Employers must fight the impulse to forego human resources training to reduce expenses. The true cost of such a decision may very well dwarf any potential savings. Moreover, the current litigation frenzy provides yet another reason to maintain employment practices liability insurance.

The 2008 EEOC charge statistics paint a frightening picture for employers across the country. The consequences of facing a discrimination charge could be devastating to an already struggling business. Employers must make every effort to recognize potential ‘danger zones’ when dealing with their workforce, especially if lay-offs are expected. Employers choosing to disregard the current environment, as well as their legal obligations under the several anti-discrimination laws may soon discover that for every one of those 95,402 petitioners who filed a charge with the EEOC, there was a respondent.

Please click here to learn more about preventing a discrimination lawsuit or click here to get more information about purchasing employment practices liability insurance.

 

Condominium Boards Going Red Over Unit Owners Going Green

By: Martin Salcedo, Esq.
Setnor Byer Insurance & Risk

Did you know that the earth receives more energy from the sun in one hour than the world uses in an entire year? In the past, such a fact was considered trivial. Today, however, it is fueling (pardon the pun) the Going Green movement that has found prominence in local and national political debates and news productions. The need to decrease our dependence on oil and increase our use of renewable energy resources is highlighted by concerns over global warming, turmoil in oil-producing regions, and the recent memory of paying more than $4 per gallon of gasoline.

Although polling suggests that the green movement is increasing in popularity and that many are doing what they can to reduce their carbon footprint, those trying to harness the power of the sun in their condominium communities have been encountering significant resistance from their condominium association boards. This is reflected by the increasing number of disputes involving unit owners attempting to install solar energy devices. Given the popularity of going green, those who are perceived as obstacles to the movement are achieving unwanted notoriety.

Ordinarily, condominium boards opposing the installation of solar collectors or other energy devices based on renewable energy resources are enforcing restrictions found in the condominium documents (e.g., bylaws, declarations, etc.) that prohibit such installation. Others are ostensibly protecting the appearance or theme of the condominium community by preventing the installation of unattractive or obtrusive devices, regardless of their benefit. However, notwithstanding motivation, legislative mandates are significantly restricting a condominium board’s ability to prohibit the installation of solar collectors or other renewable energy devices.

In Florida, for example, a deed restriction, covenant, declaration, or similar binding agreement may not prohibit solar collectors or other energy devices based on renewable resources from being installed on buildings. In Arizona, an association cannot prohibit the installation or use of a solar energy device regardless of what the community documents provide. Maryland prohibits unreasonable limitations on the installation of solar collectors.

These laws represent a trend toward the protection of a landowner’s right, including a condominium unit owner’s right, to install solar collectors or other energy saving devices on their property. Their rights, however, are not absolute in that these laws typically allow for some restrictions on the installation of such devices.

Thus, while a Florida unit owner may not be denied permission to install solar collectors or other energy devices within the boundaries of a condominium unit, the board may determine the specific location where solar collectors may be installed on the roof. Similarly, in Arizona, an association may adopt reasonable rules regarding the placement of the solar device.

However, it is important to note that these laws typically provide that any such restrictions cannot impair the effectiveness of the device. In practice, this means that a board may not force a unit owner to place the device in a shady area, have the device face the wrong direction, or paint the device to match the community’s appearance, because these efforts may reduce the device’s effectiveness.

Needless to say, handling a request for permission to install a solar collector, or some other device based on a renewable resource, can be perilous. The stakes are significantly increased by the fact that laws protecting the right to install such devices typically allow the prevailing party to recover attorney’s fees in the event litigation arises.

The likelihood of encountering a request for permission to install a solar collector or some other renewable energy device is increasing with every government rebate and tax credit available for those electing to go green. Since improperly handling such a request can have damaging consequences, a board should seek professional advice before taking any action on the request, regardless of what the condominium documents provide. If a request is illegally denied, the board will be left red in the face while the unit owner goes green.

If you would like to learn more about your obligations as a condominium board member, check out our condominium training which has been approved by the State of Florida.

Oh No, I've Been Served!

By: Anita Setnor Byer, President
Setnor Byer Insurance & Risk

The day was progressing like any other—putting out fires, monitoring production, cultivating new business—until the receptionist announced the presence of an unexpected visitor. The hand you held out for an introductory shake was met with a bundle of paperwork. The confusion created by the unanticipated delivery was momentarily clarified when the visitor mumbled a few parting words: “You’ve been served.”

A brief scan of the documents revealed that a former employee filed a lawsuit in federal court alleging unlawful discrimination. The expected stream of emotions soon follows: bewilderment, denial, fear, anger, and finally pragmatism. Something needs to be done, and since an answer to the complaint must be filed within 20 days, contacting an attorney must be near the top of the list.

Unfortunately, defense attorneys do not typically handle cases on a contingency-fee basis.  Rather, they bill their time hourly, and while many attorneys provide a complimentary phone call, the meter typically starts running shortly thereafter. Clients are ordinarily expected to cut a substantial retainer check before any steps are taken to mount a defense.

Needless to say, defending against an employment practices lawsuit, such as one alleging discrimination or harassment, is a costly proposition. Even if the employer wins the lawsuit, the outcome of the experience will invariably be viewed as a loss. The bill for attorneys’ fees alone will invariably cause financial harm to an organization. For those already struggling through difficult economic times, the harm may be irreversible.

The employer in this hypothetical situation has no choice but to deal with the imminent present since nothing can be done to change the past. However, for those cringing at the thought of personally experiencing this situation in the future, there is one thing that can be done to alter the experience—obtain employment practices liability insurance (EPLI).

EPLI protects employers in the event of such workplace claims as discrimination, wrongful termination, and sexual harassment, as well as other civil wrongdoings, such as wrongful demotion, failure to promote and discrimination by third parties (i.e., clients). Generally, a policy covers eligible losses stemming from such causes of action, as well as associated litigation costs, including attorneys’ fees. And the insurance company will provide the services of attorneys who specialize in defending against such claims, thereby significantly increasing the likelihood that employers will prevail in the event litigation does occur.

Yet, despite these obvious and valuable benefits, many organizations choose to forego purchasing EPLI. Those responsible for protecting their organization from the risk of loss have plenty of reasons for deciding not to purchase EPLI. However, upon closer examination, it is clear that the security afforded by these reasons is illusory. Let’s take a look at a few.

None of my employees would ever sue me. Let’s assume that this is true (although we know it isn’t). Did you know that several equal employment opportunity laws, such as Title VII and the Americans with Disabilities Act, also protect applicants? While some organizations may take comfort in the belief that their employees would never sue, such a perception does not address, much less protect against, the possibility of an employment practices lawsuit being filed by an applicant. Needless to say, those relying on the charity of strangers for security have a significant hole in their risk management umbrella.

Our organization complies with all employment laws. There is little doubt that most organizations have every intention of complying with applicable employment laws, and that they, in fact, make a good faith effort to do so. Unfortunately, this reasoning incorrectly assumes that lawsuits are only filed by those who were actually victims of an unlawful employment practice. In reality, many employers are ultimately found to have not violated the law, yet they were still required to defend their actions in court. Undertaking a defense is expensive, and from a purely economic standpoint, vindication through the judicial system is often not worth the price of admission.

It can’t happen to me. Clearly, this age-old rationalization is as wrong in this context as it is in everyday life. According to the Equal Employment Opportunity Commission, the number of employment related claims is on the rise. Hence, it is not only happening, but it is happening in greater numbers. While this increase in claims may be attributed to several factors, including a struggling economy or corporate cutbacks in HR training and monitoring, there is good reason to believe that the increase will continue well into the future.

Consider that the ADA Amendments Act broadened the scope and applicability of the Americans with Disabilities Act. Since more people qualify as disabled under the amended law, more people will be entitled to the ADA’s protection. In practice, this signals the existence of a new and significant risk exposure—an ADA lawsuit—that may not have previously existed. Therefore, the likelihood of falling victim to an employment practices lawsuit is greater now than it was then.

We are a small operation so we don’t have to worry about employee lawsuits.  While employee lawsuits brought against large companies make the headlines, smaller operations should be equally concerned about being sued for an unlawful employment practice. Compared to large corporations, many smaller organizations operate casually and informally. While a collegial atmosphere can make for a more relaxed workplace, it may increase the likelihood that behaviors are not properly monitored or that policies are non-existent or loosely applied. Moreover, smaller organizations often do not have the budget or infrastructure to ensure the proper handling of human resources. Since these factors almost invariably lead to lawsuits, smaller organizations are prime candidates for EPLI.

We have an excellent HR department that ensures compliance with all equal employment opportunity laws. While placing an emphasis on human resources can go a long way toward reducing the risk of being sued for an unlawful employment practice, it is by no means a guarantee. Two things merit discussion on this point. First, unlawful employment practices occur despite top-notch HR departments. Consider that a well-known, publicly traded clothing retailer paid approximately $50 million to settle a class-action discrimination lawsuit despite what was surely a well-qualified HR department. Furthermore, it is important to acknowledge that efforts of the HR department do not always filter down to the entire workforce.

Second, in some situations, the risk of violating an equal employment opportunity law cannot be reduced by the HR department. The recent amendments to the Family & Medical Leave Act’s regulations provide a good example. Until the precise scope and applicability of the regulations are determined by the courts, employers are operating with their best guess as to what the regulations actually require. Unfortunately, this means that some employers, regardless of the quality of their HR department, must defend their actions in court, often at great expense. This reality underscores the importance of EPLI.

There is no room in the budget for EPLI. Certainly, budgetary constraints are always a valid consideration. While many view the premium for EPLI as the budgetary figure worthy of consideration, the real figure is the amount that will have to be paid out in the event a lawsuit is filed. How do the attorney’s fees and the plaintiff’s judgment fit into the budget? A realistic approach to the budget should consider the potential cost of not obtaining EPLI rather than the cost of the premium. When such a calculation is undertaken, purchasing EPLI is almost invariably considered a smart investment.

Although there are many reasons for not purchasing EPLI, once a lawsuit is filed, all of those reasons lose whatever merit they may have had to begin with. There is a world of difference between personally dealing with (and paying for) the defense of an employment practices lawsuit versus forwarding the papers to the insurance company. One option is not only cheaper, but it provides a peace-of-mind that allows the organization’s focus to remain on the continued successful operation of the business. Needless to say, the alternative is much, much worse.

If you would like more information about EPLI, please contact us.