Define: Dram Shop Act

The Dram Shop Act is a legal statute that imposes liability on establishments, such as bars or restaurants, that serve alcohol to individuals who subsequently cause injury or harm to others due to their intoxication. Under this law, establishments may be held responsible for damages if they knowingly serve alcohol to individuals who are visibly intoxicated or underage, and those individuals subsequently cause injury or harm to others, such as through drunk driving accidents or violent behaviour. The Dram Shop Act is designed to discourage the irresponsible service of alcohol and to provide recourse for victims of alcohol-related incidents. The specifics of the Dram Shop Act vary by jurisdiction, including the scope of liability, the burden of proof, and available defences for the accused establishments.

The Dram Shop Act holds retail businesses liable for damages or loss caused by serving alcohol to intoxicated patrons. The law was passed to create an incentive for owners of alcohol establishments to develop responsible service policies and to properly train employees to refuse alcohol sales to intoxicated patrons.

Dram shop laws vary by state. For example, some states will not require a business to pay for damages suffered by the injured party because the courts recognize it was the customer’s decision to drink too much. In some states, the amount a victim can sue a business is also limited because the drinker is equally responsible for their decision to drink too much. To limit liability a business is generally required to purchase liquor liability insurance in addition to general liability coverage. But these insurance policies have limitations and may not cover the costs if a minor was served alcohol or if the patron was obviously drunk.

This site contains general legal information but does not constitute professional legal advice for your particular situation. Persuing this glossary does not create an attorney-client or legal adviser relationship. If you have specific questions, please consult a qualified attorney licensed in your jurisdiction.

This glossary post was last updated: 29th March 2024.