Community events bring members together and enhance holiday spirit. At SpectrumAM, we want to help our boards provide a happy holiday season for their members, but it’s also paramount that the board act prudently when considering any actions that could cause liability.

With the holiday season fast approaching, many HOAs will be hosting social events. This begs the question of whether an association can or should provide alcohol, or even allow alcohol consumption during HOA-sponsored events or on association property.

This week, we’ll discuss the potential liability involved when serving alcohol at an association-sponsored event and provide tips for taking sensible precautions to minimize any potential liability. We interviewed several insurance experts whose opinions are stated below. Spectrum’s counsel is to never allow alcohol at community events. The risks far outweigh the benefit.

Potential Liability

When considering potential liability involving the act of serving alcoholic beverages at any HOA event, lawsuits instantly come to mind. To avoid the possibility of such a lawsuit, the simple answer is to refrain from serving alcohol. (Some associations already have a policy in place which bans alcohol at community events or on association property.)

However, if it’s permissible to serve or consume alcohol in your community at an HOA or member-hosted event, it is highly advised by the experts that the board limit the types of alcohol to beer and wine while taking the precautions described below:

Insurance

Before planning for an event involving alcohol, it’s imperative that the board talk to the association’s attorney or insurance broker and follow any advice they provide regarding this topic.

In addition to compliance with all applicable state laws, below are a few topics/questions the board should consider when discussing an event with alcohol:

  • Obtaining a proper liquor license or hiring a licensed, bonded, and insured caterer/bartender.
  • Prohibition of underage drinking. Are minors allowed to attend the event? If so, how will they be identified?
  • Providing alternative transportation (Uber, Lyft, taxi, or shuttle) to guests.
  • Hiring security for the duration of the event. Most event suppliers/planners require at least one security officer per 100 guests if alcohol is served.
  • Adopting a policy in case something goes wrong. Who should be contacted? What information needs to be gathered?
  • Last but not least, schedule a policy review with your insurance agent or broker to determine your policy’s coverage.

To Charge or Not to Charge?

If the association hosts a party for members and is serving alcohol but not charging for it, the experts’ consensus was that it should be verified that the Commercial Package includes Host Liquor Liability coverage.

On the other hand, it’s important to note that if an association charges admission to an event where alcohol is served, it can be liable for injuries or deaths that may occur as a result of alcohol consumption. In this scenario, the HOA would be profiting from the charge of alcohol and must purchase a Special Event policy that offers Liquor Liability coverage, as Host Liquor Liability coverage would no longer apply.

Keep in mind that choosing to hire a bartender or caterer for your HOA event does not automatically negate the HOA’s responsibility. In fact, the board should ensure that the party has insurance and that the association is named as an additional insured for the event. You can do this by verifying with the association’s insurance agent if the amount of coverage is sufficient, or if the association should purchase separate coverage for the event.

The board should also verify that state law and the association’s governing documents permit association funds to be spent on what may not qualify as association business. There’s also the consideration of whether your state requires a license to serve beer or wine.

BYOB

Again, with all these considerations and risks, the best course of action would be to refrain from serving or allowing alcohol at an HOA-sponsored event. If the board has the option and still chooses to allow for alcohol, consider having the party as a “BYOB”, or “Bring Your Own Beverage”.

If the event is BYOB, the association is not actually providing the alcohol, while still allowing members to bring their beverage of choice (although only beer, wine, or non-alcoholic drinks should be allowed).

What About Private Parties?

If a homeowner/member of an HOA hosts an event on HOA common grounds, the association should always verify if the host plans to serve alcohol at said event. As mentioned previously, in some cases, the association has provisions in place which do not allow for alcohol to be served, period.

If permissible, and the host is planning to serve alcohol, Special Event insurance and Liquor Liability coverage should be required in addition to Commercial General Liability coverage. The policy should name the HOA as an additional insured.

General Precautions for Serving Alcohol at HOA-Sponsored Events

Whenever an association serves alcohol at an event, the board would be wise to take reasonable precautions to minimize potential liability:

  • Establish a two-drink limit.
  • Serve only beer or wine; avoid hard liquor!
  • Ensure that the premises are safe.
  • Attendees should be of legal age; either no minors allowed, or have in place a thorough identification/vetting process that prohibits minors from imbibing.
  • Refrain from serving a visibly intoxicated person (doing so could result in a charge against you).
  • Stop serving alcoholic beverages in advance of the event’s ending time.

No matter which type of event the board decides to hold this holiday season – a spontaneous gathering, a casual homeowner get together, or a large community event – it is wise to consider all options and possible liabilities, and to confer with the association’s legal counsel and/or insurance company. While we do not recommend hosting an event with alcohol, as we believe the risks far outweigh the rewards, we at SpectrumAM wish you and yours a safe and enjoyable holiday season! If you are wondering what types of events we’ve had success with, we’d be happy to share!