Indiana Supreme Court Upholds Common-Law Liability for Dram Shops

In a recent decision, the Indiana Supreme Court affirmed the trial court’s denial of a motion to dismiss a negligence claim against two restaurants that served alcohol to an intoxicated driver who later caused a fatal car crash. The case, WEOC, Inc. v. Niebauer, involved the interpretation and application of Indiana’s Dram Shop Act, which limits the civil liability of entities that furnish alcoholic beverages to someone who causes injury due to intoxication.

The Court held that the Dram Shop Act did not eliminate the common-law liability of dram shops, but rather modified it by imposing two additional requirements: (1) the person furnishing the alcohol must have actual knowledge of the injury-causing person’s visible intoxication; and (2) the intoxication must be a proximate cause of the injury. The Court found that the plaintiff’s negligence claim satisfied these requirements and alleged facts capable of supporting relief.

The Court clarified the history and scope of dram-shop regulation in Indiana, which dates back to the late nineteenth century. The Court explained that Indiana’s dram shops have faced criminal liability for various conduct since then, and civil liability under principles of common-law negligence since the 1960s. The Court also noted that the Dram Shop Act, enacted in 1986, was not applicable in two previous cases that recognized the existence of independent common-law liability, Picadilly, Inc. v. Colvin and Gariup Construction Co. v. Foster.

The Court rejected the argument that the Dram Shop Act abrogated the common law in either express terms or by “unmistakable implication.” The Court observed that the statute did not mention common-law rights, nor did it establish elements of an independent statutory cause of action or criminalize conduct. The Court also found that the statute was not designed to replace the common law or so comprehensive that it and the common law could not coexist. Rather, the statute presumed the existence of common-law liability, subject to the statute’s requirements.

The Court also addressed the interplay between the plaintiff’s two negligence claims: one based on a violation of the criminal statute that prohibits serving alcohol to an intoxicated person, and one based on a failure to exercise reasonable care in furnishing alcohol. The Court acknowledged that the two claims were similar and that the plaintiff could not recover twice for the same wrong. However, the Court reasoned that dismissing the second claim at this stage would make no difference, because the defendant’s liability depended on the same factual scenario: an act of common-law negligence that included the Dram Shop Act’s requirements. The Court also noted that the plaintiff’s allegations in the second claim could be relevant to comparative fault or alternative theories of recovery.

The Court affirmed the trial court’s denial of the motion to dismiss and allowed the plaintiff’s negligence claim to proceed. The Court also provided guidance for future cases involving dram-shop liability in Indiana. The Court emphasized the importance of the common law as a source of rights and remedies, and the need for clear legislative intent to abrogate it. The Court’s also clarified the relationship between the Dram Shop Act and the common law, and the requirements for establishing liability under both. You can read the Court’s decision here.

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