Teens Drinking at Parties = Insurance Issues

Once their kids are teenagers and in high school, parents fret about the trouble they could get into with friends, especially at parties. Unfortunately, these gatherings may involve alcohol, posing a risk of teens harming themselves and others.

Parents of kids who throw these parties, with or without their parents’ knowledge or consent, may bear responsibility for what happens there and for injuries or damages that occur after guests leave.

While their homeowner’s liability coverage may cover financial damages, the circumstances of the accident determine which policy will respond.

Take an example of a guest who consumes several beers at the party, drives off, gets into an accident and injures himself and a passenger. The parents of both injured teens sue the parents who hosted the party, who in turn notify their homeowner’s insurance company. However, the policy’s personal liability coverage does not apply to an insured person’s legal liability for:

• The occupancy, operation or use of a motor vehicle by any person.
• The entrustment of a motor vehicle by the insured person to anyone else.
• The insured person’s failure to supervise or negligent supervision of any person using a motor vehicle.
• The actions of a minor involving a motor vehicle.

Where auto insurance kicks in

Because of this, the homeowner’s policy would not cover the parents’ liability or defense costs. However, their personal auto insurance policy may cover them. The policy’s liability insurance covers the individuals named on the policy and household residents who are their relatives for liability for bodily injury from an accident arising out of the use of any auto.

Even though the parents were not actually operating the vehicle involved in the accident, their policy will cover their liability. In addition, the auto policy that applies to the car involved in the accident (the guest’s insurance or his parents’) will also cover the hosts’ liability for the passenger’s injuries. The hosts’ policy will step in if the owners’ policy does not apply or has paid out its maximum limit.

Now, assume that the guest consumes beer, but a sober guest gives him a ride home. Rather than go straight to bed, the young man goes for a swim in his parents’ pool and drowns. His parents sue the hosts, alleging that his judgment was impaired because the hosts allowed him to drink.

In this situation, the homeowner’s policy should pay for the hosts’ liability and legal defense. Because this accident did not involve a motor vehicle and no other policy provisions that would remove coverage apply, the policy will cover the claim.

Differences in coverage

While one policy or the other may apply to a liquor liability claim, there could be significant differences between the coverage limits the two policies provide. Most homeowner’s policies provide personal liability coverage of at least $100,000 per occurrence; many provide limits of $300,000 or $500,000.

Auto policies may provide much less coverage if the homeowner has only the state-mandated minimum coverage, but those limits are relatively small. Every state has different requirements for minimum limits for injuries or deaths to third parties.

Should a young person be seriously injured or killed, the damages claimed could exceed these amounts. Parents should consider buying an umbrella policy, which pays for damages that surpass the amounts payable under homeowner’s and auto policies.

Of course, the best course of action is to properly supervise parties so that everyone has an enjoyable time and lives to have another one.