A New Era in Dram Shop Litigation

On Behalf of | Feb 26, 2020 | Civil Litigation |

The Iowa Dram Shop Act (Iowa Code 123.92) gives an individual a cause of action against an establishment that sells alcohol to a person who in turn causes another’s claimed damages or injuries.  This Act plays out in our courtrooms most often in cases of drunk driving and bar fights, where Plaintiffs file lawsuits against taverns for serving the individual causing the accident or fight.

Since the mid 1980’s this statute has remained the same, creating liability against establishments that sell and serve alcohol to an individual when the bar knew or should have known that the person was intoxicated or would become intoxicated and that person causes an injury.

However, this Act has recently undergone a substantial overhaul that is now entering our courtrooms.

On July 1, 2018, an amendment from the Iowa Legislature to Iowa Code 123.92 went into effect creating substantial changes to the Iowa Dram Shop laws. Even though the amendment was signed into law back in 2018, because the Iowa Supreme Court has previously held that amendments that make substantive changes to a law do not apply unless the cause of action accrued after that date, cases under the new law have only recently started to surface.  See Thorp v. Casey’s General Stores, Inc., 446 N.W.2d 457 (Iowa 1989).  We are now beginning to see the first cases filed that involve the new statute.

The Amendment to the Iowa Dram Shop Act creates the potential for new defenses and strategies for taverns defending against these claims. We are essentially now entering a whole new era of Dram Shop litigation.

  1. The new law removes the old “known or should have known standard” and replaces it with “visibly intoxicated.”

Perhaps the largest change to the statute is the removal of the “known or should have known standard” for liability.

Prior to the new amendment, dram shop liability attached when an establishment served beer wine or intoxicating liquor when it “knew or should have known the person was intoxicated” or would “become intoxicated”. This created a framework where the jury was forced to examine what a bartender knew or should have known based on the behavior of an alleged intoxicated person. It created liability for an establishment that sold alcohol when it knew the person was intoxicated at the time of the sale, but it went further allowing for liability when a patron did not show signs of intoxication at the time of sale, but the alcohol sold caused the intoxication that followed.

The amendment changes this framework completely. The jury now does not need to examine if the establishment knew or should have known that a patron was intoxicated or would become intoxicated, and now will look to whether the alleged intoxicated person was visibly intoxicated at the time of sale.  The new law now only creates liability for the sale of alcohol “provided that the person was visibly intoxicated at the time of the sale or service”.  The term “visibly intoxicated” is not defined by the statute, and it remains to be seen how the Iowa Courts will define it.  However an establishment can now focus its defense on how the alleged intoxicated person appeared and limit that inquiry only to the time the actual service took place. Surveillance inside the establishment will become an even more crucial piece of evidence.

  1. The new law codifies the “direct sale” requirement.

Under the old statute, liability attached to establishments that “sold and served any beer, wine, or intoxicating liquor”.  However, the statute was silent on the issue of indirect sales, where for example a tavern sold a pitcher of beer to one person who in turn gave a drink to another person.  Over the years, there has been litigation on this issue asking the Courts to expand the “sold and served” language to include people that obtain alcohol in a bar without a direct sale. See e.g. Hawthorne v. Estate of Krommenhoek, 836 N.W.2d 152 (Iowa App. 2013). In Hawthorne, the alleged intoxicated person drank at an establishment out of a pitcher of beer that was purchased by another patron.  The Iowa Court of Appeals held that even though the alleged intoxicated person consumed alcohol in the premise, a dram shop claim was not proper because the alleged intoxicated person was not sold or served alcohol directly by the establishment.  It noted that “some type of consideration or detriment by the purchaser is required for a sale to have occurred” under the Act.  Id.

The new amendment codifies this concept and states that the Dram Shop Act applies to an establishment “who sold or served any beer, wine, or intoxicating liquor directly to the intoxicated person. . .”.  Iowa Code 123.93 (2020).  This amendment opens the door to defenses on indirect sales or situations where a patron obtains alcohol in the premises from sources other than the establishment.

  1. The new amendment adds “soft caps” to non-economic damages.

The new amendment adds to dram shop litigation a “soft cap” on non-economic damages.  It provides that:

“The total amount recoverable by each plaintiff in any civil action for non-economic damages for personal injury, whether in tort, contract, or otherwise, against a licensee or permittee, shall be limited to [$250,000.00] for any injury or death of a person, unless the jury determines that there is a substantial or permanent loss or impairment of a bodily function, substantial disfigurement, or death which warrants a finding that imposition of such a limitation would deprive the plaintiff of just compensation for the injuries sustained”.

Iowa Code 123.92 (2020).  Under this new amendment, the jury will need to be given an instruction and verdict form to answer whether the case involves a “substantial or permanent loss or impairment of a bodily function, substantial disfigurement, or death. . .”.  These terms are undefined and it remains to be seen how the courts will interpret them.  However, this amendment creates new defenses to ever-growing damage claims.

  1. The new amendment codifies that the intoxicated person cannot file a Dram Shop Claim.

The final change to the statute involves standing to bring the action under the statute.  The old statute provided that “any person” could bring a claim, leaving it to the Court to make the determination on whether someone who is injured by their own intoxication could bring a claim under the Act.  The amendment makes it clear that intoxicated persons cannot recover for injuries caused by their intoxication by providing that the “any third person who is not the intoxicated person who caused the injury at issue. . .” can bring a claim under the Act.

Because we are now just seeing the first cases with injury dates post July 1, 2018, there are still a lot of unknowns about how this Act will be interpreted and applied within the state of Iowa. However, this new amendment is reshaping the liability of taverns and allowing new strategies and defenses to bring these claims to successful resolution.

This article was written by member-partner Amanda M. Richards.