An attitude adjustment; the time has come to condemn abusers of the liability system - restaurant industry

AN ATTITUDE ADJUSTMENT

Like other industries, restaurateurs are experiencing enormous increases in the cost of liability insurance. Liquor liability insurance is the second most difficult coverage to obtain, after pollution risk. In some regions of the country liability insurance is simply not available. When it can be obtained, rates have skyrocketed.

For the past few years, National Restaurant Association members have been reporting these increases. One operator in Washington, D.C., saw his premium climb from $185 to $26,500 in one year. A Michigan operator reported an increase from $6,700 to $30,520. A restaurateur in New Jersey reported that the cost of his total liability package rose from $25,000 to $92,000.

To get a better perspective on this situation, the National Restaurant Association has engaged the Gallup Organization to survey the restaurant industry and develop average figures. The results are astounding. Sixty-nine per cent of the respondents reported increases in liquor liability premiums during the previous year, yet 91% said they had never been named in a suit. The average increase was 110%; the average premium paid: $39,500.

The search for the causes of these startling increases takes us back to the growing number of liquor liability suits brought against food-service operations. The International Risk Management Institute estimates that there has been a 300% increase in such suits during the past year. And there has been an equally alarming increase in the size of the out-of-court settlements and jury awards that result from these suits.

Let's give you a list of recent liquor liability awards:

* A $1.7 million settlement against a convenience store in Florida

* A $3.9 million settlement against a Chinese restaurant in Massachusetts

* A $4.3 million verdict against a bar in Minnesota

* An $8.7 million verdict against a resort hotel in Pennsylvania

* A $10 million verdict against a dinner club in Alabama

Those figures have been verified, but I first discovered them in a brochure promoting an American Bar Association seminar to assist lawyers in handling liquor liability cases.

The situation I have described so far parallels the circumstances faced by other industries. What makes our situation slightly different is that the court actions we face are third-party liability suits. That is, the restaurateur is not the actual cause of the damage, but he or she is held liable anyway. Today 18 states have dramshop laws that hold the server of alcoholic beverages accountable for actions of the consumer. Seventeen states establish the same liability through common law precedent. And five states have both dramshop laws and common law liability.

There has been considerable public dispute as to whether a server should be held liable for the actions of the consumer. That is a question our society needs to address. Most restaurateurs will tell you that they are not responsible for the actions of a patron. But that they have taken responsible actions anyway.

Two years ago the National Restaurant Association introduced a three-part alcohol-awareness program. The first part of this program involves consumer education. We committed ourselves to working with other public-interest groups to warn Americans about the dangers of drunk driving.

The second part of this program involves server training. We prepared a seminar for servers of alcoholic beverages. It covers such questions as how to recognize a guest who is becoming intoxicated, how to cut off service to such a guest and how to keep an intoxicated person from driving. This seminar has now been offered in 37 states, and we are now revitalizing it and releasing it in a new form int he near future.

The third part of this program involved recommendations on in-house practices. The National Restaurant Association advised its members to eliminate all multiple-drink promotions that might be perceived as fostering overconsumption. Members were encouraged to introduce bar food, designated driver programs and alternative transportation programs.

The great majority of restaurateurs across this country have adopted the programs. They are taking responsible action regarding drunk driving. But that does not mean restaurateurs are assuming responsibility for the actions of a patron who does become drunk despite their efforts.

Recently the question of third-party liability has become more heated because of the proliferation of cases involving social host liability. In 18 states a host or hostess can now be held liable for the actions of an intoxicated guest. This new extension of liability has quite literally brought the plight of the bartender home to the average citizen. As a matter of fact, a recent Associated Press poll showed that 72% of respondents believe that bartenders should not be held legally responsible for injuries caused by intoxicated patrons.

It is not my purpose to argue the case against third-party liability. I merely wish to point out that our society is by no means unanimous in holding one citizen responsible for the actions of another. Nevertheless, the number

of third-party liability cases is escalating rapidly, and awards ranging up into the millions of dollars are regularly being handed down.

Imagine for a moment the parties in court when such a case is tried. First there is the plaintiff. He or she may be the actual victim of an automobile accident and may be maimed, scarred, or crippled. with coaching of a good lawyer, the plaintiff will describe both the agony suffered and the long-term effects of the accident.

Or the plaintiff may be a spouse, parent, or child of a person killed in the accident. In that case the plaintiff will testify to the loss of love and financial support as well as to the anguish and grief suffered.

In either case, the plaintiff has and deserves our sympathy for the needless suffering.

Then there is the drunk driver who is the direct cause of this suffering. He or she may be the victim of circumstance--a person who became intoxicated once and did something foolish. But more often the drunk driver is a habitual offender, an individual with a drinking problem who is adept at hiding his or her drunkenness. The driver is probably remorseful and may even have sought treatment since the accident. At any rate, the drunk driver rarely has the resources or insurance to cover the damages the plaintiff is demanding.

All of us believe in the citizen's right to redress through the courts. This principle is sacred. It is the heart of our liability law. What we object to are abuses of this right--the kind of abuses that I have described.

To eliminate or at least reduce this kind of abuse, dramshop laws must be reformed in states where this law exists. The National Restaurant Association would like to see the state introduce very specific changes:

* First, dollar caps should be placed on the defendant's liability. Caps would assure a fair and equitable recovery for injured parties. At the same time they lend the kind of predictability to awards that the insurance industry claims is necessary to curb unreasonable premium increases.

* Second, liquor liability cases should be governed by the principle of "comparative negligence" and financial liability based solely on the defendant's percentage of responsibility for the accident. This would be a major attack on the "deep pocket" syndrome, which sees individuals named as defendants primarily because they have insurance and can pay a steep penalty.

* Third, the time period for filing a suit under the statute of limitations must be reduced to a reasonable time frame.

* And, fourth, advance notice of a liquor liability case should be provided by plaintiffs. Currently the defendant's first notice of a suit comes when the suit is filed. That usually occurs at the end of the limitation period, which can be two years or even longer. At that point the defendant often finds it impossible to reconstruct the events and present a strong defense.

These are just three changes we would like to see introduced. They would go a long way toward eliminating the abuses we are seeing.

But there is one more change that is necessary if the crisis in service and product liability is to be ended: Our society must change its attitude toward civil suits.

Our current attitude can be summed up in two sentences: "It doesn't matter if they are responsible. Their insurance will cover it."

We have all heard that sentiment expressed in a thousand different ways. Americans take a very cynical attitude toward the right to redress. They seem to believe that any insured party is fair game. They cheer on the plaintiff however frivolous or irrational his grievance. They applaud the windfall judgment as long as it goes against a well-insured professional, corporation or institution.

It is that attitude which is responsible for the crisis in product and service liability.

We as a society tend to forget the obvious: All of us pay the penalty for every large court judgment. We pay in higher premiums. We pay it in loss of goods and services. We pay it in higher consumer prices.

Social pressure is a powerful force that can modify behavior and modify the law. The time has come for our society to condemn abusers of our liability system. The alternative is an economy of scarcity and inflated prices, and none of us wants that. We must work together to eliminate injustice and abuse in our liability system.

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