Tennessee Dram Shop Act: “Visibly Intoxicated” Exception

The plain language of T.C.A. § 57-10-102(2) requires a sale of an alcoholic beverage or beer to “a visibly intoxicated person.”  The adverb “visibly” means “capable of being seen” or “exposed to view.” Taking “visibly” together with “intoxicated”, the only logical conclusion is that Section 102(2) requires proof that the alleged intoxication was perceptible or capable of being seen by the server or bartender at the time of sale.

In order to apply this exception, there must be proof beyond a reasonable doubt that the restaurant or bar “sold” an alcoholic beverage to a patron when he was visibly intoxicated.  In Temlock v. McGinnis, the Tennessee Court of Appeals considered whether a “sale” was made pursuant to the Act when the patron ordered directly from the wait staff and the wait staff served the beer to the patron, but the patron did not pay for the beer.  The court found that whether the patron actually paid for the beer was not determinative of whether a “sale” had occurred.  The court held several factors should be considered in evaluating whether a sale had occurred, stating:

We hold that when a customer enters an establishment that sells alcoholic beverages such as beer, places his own alcohol order, has the alcohol he ordered delivered directly to him by the seller with the seller’s expectation of payment in return, and the customer who ordered the alcohol consumes that alcohol on the seller’s premises, there is a sale to that customer under Tenn. Code Ann. § 57-10-102. To hold otherwise would mean that a business could adopt a policy that in serving any group of more than one individual, only one person in the group is to be allowed to “pay” for the alcohol ordered and consumed by all other members in that party even though those other individuals directly ordered the alcohol from the seller’s wait staff, had the alcohol delivered by the seller’s wait staff directly to them, and they consumed the alcohol on the seller’s premises, and, the seller then would have no potential liability under Tenn. Code. Ann. § 57-10-102 except as to the one person who paid.

Proof of “visible intoxication” is a bit more complicated.  Amendments to T.C.A. § 57-10-102(2) demonstrate the intent of Tennessee’s Legislature to require clear proof of perceptible intoxication.  In 2009, T.C.A. § 57-10-102(2) was amended by deleting the language “obviously intoxicated” and substituting “visibly intoxicated.”  The previous use of “obviously intoxicated” opened the door for proof of intoxication by circumstantial evidence, such as blood alcohol content, time spent drinking, amount consumed, etc.  The legislature recognized that this type of evidence does not clearly demonstrate intoxication to a reasonable observer.  By making the change from “obviously” to “visibly,” the legislature clarified that claimants must show something more than circumstantial proof of intoxication.

Not convinced?  The Tennessee Alcoholic Beverage Commission also requires proof of “perceptible” intoxication.  In March of 2010, the ABC amended its rules and regulations and defined “visible intoxication” as:

An impairment of an individual’s mental or physical facilities, as a result of drug and/or alcohol consumption accompanied by a perceptible act, series of acts or by appearance of an individual, which clearly demonstrates such impairment.

It is important to note that the Tennessee Legislature granted authority to the ABC to promulgate rules to “… prevent intoxication-related deaths, injuries, and other damages through responsible alcohol serving practices and awareness.”  As a result, the ABC’s interpretation that “visible intoxication” requires proof of a “perceptible act” should be given some controlling weight unless the Court finds that it is arbitrary, capricious, or manifestly contrary to the statute.

“Presumptions” of intoxication established in Tennessee criminal statutes are not applicable in dram shop cases.  In Worley v. Weigels, the Tennessee Supreme Court stated the intent of the Tennessee Legislature in enacting the Dram Shop Act was to make a “… definite distinction between the basis for civil liability and the basis for criminal liability incident to the sale of alcoholic beverages.”  So, while criminal law creates a presumption of “impairment” when the individual’s blood alcohol content is .08% or more, this presumption cannot not used to impose strict liability in a civil context.

Insured vs. Insurer – Who Bears the Burden in an Arson Case?

Consider a fire claim under a homeowner’s policy where the carrier believes the insured, or someone at their direction, burned their home.  When suit is eventually filed after denial of the claim, what burden does the insured bear?  What about the insurer?  Obviously, fire itself is typically a covered cause of loss, but it is certainly not covered when the insured intentionally burns the home to recover insurance proceeds.

Tennessee law clearly provides an insured has the initial burden to prove by a preponderance of the evidence that a loss comes within terms of the policy.  Se. Mental Health Ctr., Inc. v. Pac. Ins. Co., Ltd., 439 F. Supp. 2d 831, 835 (W.D. Tenn. 2006); Johnson v. Allstate Ins. Co., 2000 WL 1156642, *7 (Tenn. Ct. App. Aug. 16, 2000).  Most homeowner policies provide coverage pursuant to a provision requiring an “accidental direct physical loss” to covered property.  Thus, coverage would only apply in the event of an accidental loss – not an intentionally set fire.

So what must the insured prove?  In Tennessee, “there is a presumption that the burning of property is the result of an accidental cause.”  Johnson, at *7 (citing Ricketts v. State, 241 S.W.2d 604 (Tenn.1951)).  An insured meets this presumptive burden by simply testifying he did not set the fire and does not know who did it.  Id.  However, even though such a presumption exists, it can be extinguished if the insurance company comes forward with sufficient rebuttal evidence.  Much like a “bursting bubble,” if an adverse party comes forward with sufficient rebuttal evidence, any initial presumption disappears.  Farace v. Indep. Fire Ins. Co., 699 F.2d 204, n. 4 (5th Cir. 1983).   Thus, it is possible that the insurance company can come forward with sufficient rebuttal evidence to defeat any presumption that the fire was “accidental.”  In such a case, the insured should be required to otherwise prove they suffered an accidental physical loss by a preponderance of the evidence.  HCA, Inc. v. Am. Prot. Ins. Co., 174 S.W.3d 184, 188 (Tenn. Ct. App. 2005).

This burden may or may not be easily met by the insured, but it is nonetheless an initial burden of proof which is separate and apart from the carrier’s burden to prove the arson defense or an intentional act.  However, once the insured meets his burden, how can the insurer defend?

To succeed on an arson defense in Tennessee, an insurer “must show by a preponderance of the evidence that the loss was due to a fire of incendiary origin, that the insured had an opportunity to set the fire, and that he had a motive to do so.”  McReynolds v. Cherokee Ins. Co., 815 S.W.2d 208, 211 (Tenn.Ct.App.1991); see also Walters v. Tennessee Farmers Mut. Ins. Co., 873 S.W.2d 691, 693-94 (Tenn. Ct. App. 1993); Sowards v. Grange Mut. Cas. Co., 3:07-CV-0354, 2008 WL 3164523 (M.D. Tenn. Aug. 4, 2008).  “The rule as to admissibility of circumstantial evidence is liberal in such a case.”  Id.  Arson may be proved by simple preponderance of the evidence and may be by circumstantial evidence.  Id.  Tennessee law provides an insurer succeeds or “prevail[s]” in the arson defense by proving the above three elements by a preponderance of evidence.  Guess v. Grange Mut. Cas. Co., 4:05-CV-40, 2007 WL 2897892 (E.D. Tenn. Sept. 28, 2007) referencing McReynolds v. Cherokee Insurance Co ., 815 S.W.2d 208, 211 (Tenn.Ct.App.1991).