A dram shop is a legal term in the United States which refers to a bar or another establishment where alcoholic beverages are served and/or sold. Originally liquor was served by the ‘dram’, a liquid measurement equivalent to roughly 1/8 of a fluid ounce. Thus, the term ‘dram shop’ was born.
Dram shop liability laws are laws which state that owners of a bar or hosts of a party who serves alcoholic beverages can be held legally responsible for what their patrons/guests do after they’ve been drinking. For example, a person injured by an intoxicated person through a motor vehicle accident or even a bar fight, can sue establishments contributing to that person’s intoxication.
Dram shop liability laws, like DUI laws, vary from state to state. There are no dram shop laws in seven states (Delaware, Kansas, Maryland, Nebraska, Nevada, South Dakota or Virginia), while in Alabama, Alaska and Michigan, the liability is limited to selling alcohol to minors or known alcoholics. The laws in most other states cover serving people who are intoxicated.
Here’s a list of specific laws state by state: http://www.madd.org/laws/law-overview/Dram_Shop_Overview.pdf
Because bar owners are liable, to varying degrees, for the actions of their patrons consuming alcohol, many states require that bars carry liquor liability insurance in addition to general liability coverage. However, these policies do not cover owners who serve minors and/or if they serve someone who is clearly drunk.
According to Mothers Against Drunk Driving (MADD), dram shop liability laws are beneficial by helping to reduce alcohol-related crashes, increasing publicity of the impacts of over-serving and decreasing excessive and illegal consumption. 2001 research found that dram shop liability laws have decreased fatal motor vehicle crashes by 5.8 percent.
Contact an attorney for more information on dram shop liability laws in your state.