A wrongful-death lawsuit filed against retired Texas Supreme Court Chief Justice Tom Phillips and his wife is calling attention to liability and insurance issues for social hosts. The Phillips are being sued by the parents of a teenager who died in a 2009 car accident after allegedly attending a party hosted by the Phillips’ son where underage drinking occurred. The history of social host liability in Texas provides an interesting side note to the case. In November 2001, Phillips agreed with a majority of the other justices in a Supreme Court decision (Reeder v. Daniel) in which the Court majority declined to impose a social-host civil cause of action for serving alcohol, including to persons under age 18. In his concurring opinion, however, Phillips noted, “There are sound policy reasons for holding adult social hosts liable for providing alcohol to minors.” The Texas Legislature took note and in 2005 passed an amendment to the Dram Shop Act (Chapter 2 of the Texas Alcoholic Beverage Code) that allows adults to be held liable for damages proximately caused by the intoxication of a minor under the age of 18, if the adult served or provided the alcohol, or allowed the minor to be served or provided alcohol on premises owned or leased by the adult.
Where is the coverage for liability arising out of serving alcohol in a social setting, including the liability imposed on social hosts by the Dram Shop Act? There is no liquor liability exclusion in the Texas or ISO homeowners policies. What about the intentional acts exclusion? The exclusion precludes coverage for BI or PD which is “caused intentionally by or at the direction of the insured” (Texas form) or “expected or intended by an insured” (ISO form). Texas courts have consistently ruled that this exclusion is effect-focused and not cause-focused, voiding coverage only when the resulting injury was intentional, not merely when the insured’s conduct was intentional.
What about a lawsuit involving an auto accident caused by an intoxicated guest after leaving the party? The auto exclusion on the Texas homeowners policy only applies to autos owned or operated by or rented or loaned to an insured, so the policy would defend the insured if he or she were sued by a third party for a liquor-related auto accident. The auto exclusion on the ISO homeowners policy is more restrictive and would not apply in the same case. Coverage may be available in the Texas or ISO personal auto policy. The PAP covers an insured’s liability arising out of an auto accident involving a nonowned auto – even if the auto is operated by someone else – subject to certain exclusions not relevant in this case.
The previous information was authored by David Surles of IIAT. Shared here for client and potential client information
