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Holiday Parties: Licensing and Liability

December 9, 2011

The holiday party season is upon us.  Whether you're giving a small private party for employees, a large community event, or a private event within the community, questions often arise regarding the sale and service of alcoholic beverages and potential liability issues for community associations.  The best way to ensure that your event is a success and your association is protected from liability is through careful planning and knowing the law.  

Whenever an association permits the consumption of alcohol on the common areas, including any community center or meeting room, the association assumes liability exposure in the event that any harm occurs as a result of the consumption of alcohol. The more directly the association is involved in providing the alcohol, the greater the potential liability exposure.  Accordingly, the safest course of action is not to permit the consumption of alcohol at any event hosted by the association or at any event that takes place in the common areas.  However, if your association decides to sponsor an event or to allow the consumption of alcohol within the common areas, it is important to comply with the licensing requirements of your jurisdiction. 

Virginia
In advance of any event at which an association will serve alcohol or permit alcohol to be consumed, it should confirm with the Virginia Alcohol Beverage Control Board ("ABC") whether an event license is required. Under the Virginia Code, Section 4.1-209, community associations need to obtain a license from ABC for events that are association-sponsored if alcohol will be sold. Even if an association is planning an event with a professional caterer, the association should obtain a license in order to limit exposure, even if the caterer already has a license. In addition, according to ABC regulations, when an association obtains a license, it is responsible for ensuring that anyone under twenty-one years of age does not consume alcohol at the event and that anyone who has consumed more than they should is not served any additional alcohol.

In the case of an association-sponsored event in which alcohol is provided by the Association, no license will be required as long as the Association adheres to the following requirements: (1) the alcoholic beverages must not be charged for in any way; (2) consumption of alcoholic beverages is limited to common areas regularly utilized for private parties; and (3) the meeting or party is not open to the public.

The type and cost of the license will depend on the type of beverages that will be served or sold at the event and the type of event. For most association-sponsored events, a one-day banquet license or one-day mixed beverage special event license will be appropriate so long as the event is not for personal monetary gain.  The license application can be submitted online through the ABC website and the cost of a one-day license ranges from $55 to $60 depending on the type of event.  For more information on license types, qualifications, and fees you should contact your regional Virginia ABC office. 

With respect to an association’s potential liability, Virginia is a non-dram shop state, meaning that there is no statute that places liability on a person or entity that serves alcohol to an individual who, because of his or her alcohol consumption, causes injury to a third-party or to property. Similarly, Virginia courts have been reluctant to place liability on persons or entities that sell alcoholic beverages to persons who then, because of their intoxication, cause damage to a third person or property. 

Maryland
In the state of Maryland the sale and service of alcoholic beverages is regulated by local government.  Accordingly, we recommend that any associations located in Maryland contact their local city or county government to determine any licensing requirements prior to hosting an event where alcohol will be served.   

With respect to an association's potential liability, Maryland, like Virginia, is a non-dram shop state, as there is no statute that places liability on a person or entity that serves alcohol to an individual who, because of his or her alcohol consumption, causes injury to a third-party or to property.

District of Columbia
When planning an event where alcohol will be consumed in the District, an association should confirm with the Alcoholic Beverage Regulation Administration (“ABRA”) whether an event license is required. The ABRA has authority to issue temporary licenses that allow community associations to temporarily sell, serve, and permit consumption of alcoholic beverages at special events such as banquets or block parties. A temporary license may be valid for up to four consecutive days.

With respect to an association’s potential liability, the District does have a dram shop statute, D.C. Code Section 25-781, that prohibits the sale of alcoholic beverages to persons under 21 years of age and to any intoxicated person or person who appears to be intoxicated.  DC courts have held that the statute is intended to promote public safety and therefore sets the standard of care that is required when alcoholic is served.  If there is a breach of the standard of care, coupled with proximate cause, courts have placed liability on the entity that served the alcohol.  See Zhou v. Jennifer Mall Restaurant, Inc., 534 A.2d 1268 (D.C. 1987).

Limiting Liability
In addition to obtaining any required liquor license before hosting an event where alcohol will be served, it is important for an association to obtain the proper insurance coverage.  If an association is going to host events where alcohol is served or allow residents to host private events on the common elements, the association should obtain host liquor liability insurance coverage. Your association should contact its insurance agent to determine if the association already has host liquor liability coverage or to determine how to add this type of coverage to its policy.   In addition, make sure to specifically ask the insurance agent what exclusions exist under the host liquor liability policy maintained by the association. For example, many policies include exclusions relating to the sale and distribution of alcoholic beverages. For this reason, we recommend that associations not charge guests for alcoholic beverages at events and not charge an admission fee that covers the cost of any alcoholic beverages. 

Another important way to help limit liability in situations where an association permits residents to rent community facilities for an event where alcohol will be served is to require a rental agreement. Associations should use a rental agreement that makes the renter responsible for compliance with any laws relating to serving or consuming alcohol and makes the renter responsible for supervising the consumption of alcohol. In addition, the agreement should require the renter to obtain insurance naming the association as a third party beneficiary and that insurance should be primary over the association's insurance. The agreement should also require the renter to indemnify and hold the association, its officers, directors, agents and members free from claims arising from or related to the use of the premises and the consumption of alcohol.  If an association permits such private events, the rental agreement should expressly disclaim any responsibility to supervise the consumption of alcohol. 

Conclusion
For any event sponsored by an association where alcohol will be served measures should be taken to ensure adequate insurance coverage and compliance with all state and local laws on alcohol licensing and consumption. Associations should always check identification to ensure that persons being served are over twenty-one years of age and should not serve alcohol to visibly intoxicated persons. Establishing a "drink limit" may help reduce risks and limit liability exposure. Finally, associations should take precautions to ensure that intoxicated persons do not drive vehicles to and from the event.

As always, be sure to ask for advice from experienced counsel if you have any questions about licensing requirements or liability issues relating to serving alcohol at your next community event.