By Talina J. Handel B.A. J.D.

Last week the Childs v Desormeaux case provided some insight on social host liability. This week we will take a look at the commercial liability insurance in Alberta (bars and restaurants).

The Supreme Court of Canada first addressed commercial host liability in the 1973 Jordan House Ltd. v Menow and Honsberger decision. Ultimately, the court decided that an operator of a commercial establishment that sells liquor is responsible for supervising their patrons and ensuring that their consumers are safe to leave the premises and will not be a danger to themselves.

The 1973 Jordan House Ltd. v Menow and Honsberger case

In Jordan House Ltd. the Defendant Menow was a frequent customer of the bar and frequently drank excessively there. He was “kicked out” of the bar on the night of the incident after having drank there for approximately five hours. Menow hitchhiked home along a main highway and was picked up by a third party driver not involved in the case. The driver drove Menow for a short distance and then dropped him off on the road again. After he was dropped off by the third party he was hit by another vehicle while walking alongside the highway. The bar, Jordan House, was found 1/3 liable for Menow’s injuries. Menow himself was found to be 1/3 at fault for his own injuries. Had he not been intoxicated he likely would not have been hit by the car. And finally, the court found the driver who hit Menow to be 1/3 negligent as well.

What we are focusing on is the fact that Jordan House (the bar) was found liable for 1/3 of Menow’s injuries. Why wasn’t the driver who hit Menow liable for everything? Why wasn’t the car who picked Menow up and then dropped him off on the side of the road again responsible? From my understanding of the Jordan House Ltd. Judgment it all comes down to the incentive that commercial establishments (bars) have to over-serve their customers. Commercial hosts make more money when people drink more alcohol. There is an incentive for the bar and its servers to serve more liquor. Interestingly though, this motive isn’t compatible with the the liquor laws that regulate bars and restaurants operating in Alberta. The Liquor Control Act states at section 81 that, “No person shall sell or supply liquor . . . to any person under or apparently under the influence of liquor.” This law is in opposition of any restaurant or bar’s main priority which is the profits it is earning.

Additionally, it is not just the owners of these establishments that have an incentive for customers to be over-served. Servers also have an incentive to allow and perhaps even encourage over consumption of alcohol. Often times, a drunk customer will leave a better tip than others. Thus, we have a law on the one hand that says don’t over-serve and we have a business mantra on the other hand that says over-serve.

In addition to the incentive that every commercial establishment has to over-serve their patrons, an important fact that was specific to the Jordan House case was the knowledge that he employees of the bar had about Menow. They specifically knew that Menow was a heavy drinker. They knew that he could act “recklessly” on occasions. He had actually been banned from the bar a year before. The employees were told not to serve Menow unless he was accompanied by a ‘reasonable’ person. This wasn’t just some random guy that walked into the bar one night and decided to drink. This was a frequent customer and one that was known to have caused problems when alcohol was involved in the past. Nevertheless, they served him to the point of being drunk and then kicked him out of the bar to find a way home himself. They also knew that Menow would have to walk home alone along a main highway in order to get home. Ultimately, the court found that all of these factors combined clearly showed negligence on the bar’s part.

Thus, it is apparent within the Jordan House Ltd. decision that there is something to be said about the fact that Jordan House profited off of Menow being drunk. They had incentive to get him into the state that he was in and they should not have kicked him out on his own after doing so. Their incentive to over-serve, combined with their prior knowledge that Menow probably should not be over-served, allowed the court to find the bar 1/3 liable for Menow’s injuries.

Commercial Liability Insurance in Canada

It is now established law in Canada that commercial hosts owe a duty of care to their customers who are likely to use highways after drinking at the establishment. But what about innocent third parties who are injured by a drunk driver? Is the restaurant/bar liable to those people too or is the sole liability on the drunk driver?

In 1995 the Supreme Court of Canada in Stewart v Pettie said yes, bar and restaurants can be liable to third parties who are hit by drunk divers who became intoxicated at a restaurant/bar. This was a significant decision. The practical reality of this decision means that innocent victims who are injured by drunk drivers are able to be fully compensated even if the at fault driver does not have sufficient auto insurance to cover their losses. The lawyer representing the innocent victim can therefore look for someone else to share the blame, ensuring that they obtain a proper amount of compensation for their client. Restaurants/bars are a natural target for someone else to share the blame because they get the driver drunk, make a profit by doing so and then turn that driver out on the streets to drive. Common sense would dictate that obviously the drunk driver poses a danger to the general public.

Thus, not only are commercial hosts liable to their customers who they get drunk but they can also be liable to innocent third parties who are hit by a drunk driver. If that drunk driver became intoxicated at a restaurant or bar then that establishment can be on the hook for compensating the innocent victim. This will typically occur when the drunk driver does not have sufficient auto liability insurance to properly compensate the innocent victim. However courts usually hold bars who over-serve only one-third liable for the injury claim or fatality damages.