Can You Drink It All In?

Can You Drink It All In?

Can You Drink It All In? Robin Federici, CPCU, AAI, ARM, AINS, AIS, CPIW

ISO CGL LIQUOR EXCLUSION

COVERAGE A EXCLUSIONS LIQUOR LIABILITY ISO revised the Liquor Liability exclusion to address two issues: 1. "Bring Your Own" establishments (BYO) 2. Certain court decisions with respect to claims of negligence by an insured.

COVERAGE A EXCLUSIONS LIQUOR LIABILITY This exclusion generally only applies if the named insured is in the business of Manufacturing Distributing Selling, serving or furnishing alcoholic beverages

LIQUOR LIABILITY PREVIOUS LANGUAGE

COVERAGE A EXCLUSIONS LIQUOR LIABILITY 2007 & previous editions: Coverage is excluded for: (1) Causing or contributing to the intoxication of any person; (2) The furnishing of alcoholic beverages to a person under the legal drinking age or under the influence of alcohol; or (3) Any statute, ordinance or regulation relating to the sale, gift, distribution or use of alcoholic beverages.

COVERAGE A EXCLUSIONS LIQUOR LIABILITY 2007 & previous editions: However, this exclusion applies only if you are in the business of manufacturing, distributing, selling, serving or furnishing alcoholic beverages.

COMMON LAW, COURT CASES & STATE STATUTES

HOST LIQUOR Background Common Law No cause of action against the person who furnished the liquor A person cannot become intoxicated when served liquor, unless he/she consumes it Injuries stem from voluntary consumption not from the service of liquor Many courts have permitted suits against servers of liquor based upon the principle of common law negligence

HOST LIQUOR McGuigan vs. New England Telephone The Commonwealth of Massachusetts Supreme Judicial Court recognized the liability of a social host for injuries caused by an intoxicated guest In situations where alcohol is served to a guest who the host either knows or should know is intoxicated

THE NJ LIQUOR COURT CASE! Rappaport vs. Nichols (1959) An 18 year old boy was involved in a collision in which a man was killed The estate sued the boy and the 4 taverns He was served liquor in spite of knowledge that he was a minor Common Law holds the one that consumed the liquor responsible for their acts The court felt that it was the tavern keeper s negligence that contributed to the driver s intoxication and based on common law negligence they should be held liable

LIQUOR LAWS Individual States Determine: Dram Shop (Liquor Liability) Alcoholic Beverage Control Acts

Dram Shop or Civil Damage Acts Liquor Liability Statute Give persons a civil right of action against providers of alcoholic drinks The injury or property damaged must be caused by an intoxicated person or a minor The dram shop acts of different states vary in assessing liability

Alcoholic Beverage Control Acts Generally prohibit the sale or gift of liquor to a minor, a habitual drunkard, or to an intoxicated person Do not automatically give persons injured a civil right of action against the server or seller They provide criminal penalties against the operator, and in some cases the premises owner where the sale or serving occurred

STATE LAWS Today, determining liability for the service of liquor is often dependent on State Law!

CURRENT CGL LIQUOR EXCLUSION WHY THE CHANGE?

COVERAGE A EXCLUSIONS Other Changes LIQUOR LIABILITY Several liquor liability court cases have addressed other negligence issues beyond just the service, etc. of alcohol

COVERAGE A EXCLUSIONS Other Changes LIQUOR LIABILITY Questions have been raised with respect to BYOBs (those that permit others to bring alcoholic beverages for consumption on their premises) Are these establishments in the business of selling, serving or furnishing alcoholic beverages?

LIQUOR CGL COURT CASES Changes Effected by CGL Court Cases ISO has reviewed several court decisions addressing Liquor Liability Exclusions in general liability policies Based on theses GL court cases, two changes are being made

THE COURTS HAVE SPOKEN

LIQUOR CGL COURT CASES Penn-America Insurance Company v. Peccadillos (Pa. Super. Ct. 2011)

LIQUOR CGL COURT CASES Penn-America Insurance Company v. Peccadillos (Pa. Super. Ct. 2011) Two friends visited several bars drinking excessive amounts of alcohol, causing them to be significantly and visibly intoxicated. At the insured's location, after a physical altercation with another patron, the two friends were required to leave the premises It was apparent that neither of them was in a safe condition to drive.

LIQUOR CGL COURT CASES Penn-America Insurance Company v. Peccadillos (Pa. Super. Ct. 2011) Upon leaving the bar they caused an accident by colliding with another vehicle while attempting to pass it. As a result, the driver of the other vehicle and a passenger were killed and two minor children of the driver of the other vehicle were seriously injured.

Penn-America Insurance Company v. Peccadillos SEEKING CGL COVERAGE: The insured argued that the allegations against them fell outside the related CGL liquor exclusion. The insured emphasized the allegation that the injuries & damages were caused by: reckless and/or negligent, grossly negligent willful and/or wanton actions and/or inactions of continuing to serve alcoholic beverages to visibly intoxicated patrons thereby rendering the driver incapable of safely operating his vehicle by ejecting the patron after an altercation, rather than summoning the police

Penn-America Insurance Company v. Peccadillos On appeal, Penn-America argued that the negligence allegations fell squarely within the liquor liability exclusion.

Penn-America Insurance Company v. Peccadillos The Superior Court disagreed with the carrier It found that the "Insuring Agreement" clearly recognized the insurer's duty to defend, and that the obligation remained unless the liquor liability exclusion defeated every cause of action in the complaint. The court noted: "Although the liquor liability exclusion clearly excludes liability based on having 'caused or contributed to the intoxication'... it does not limit, in any way, liability that may be assessed for other reasons.".

Penn-America Insurance Company v. Peccadillos The court noted that Pennsylvania law recognized that the duty to defend is broader than the duty to indemnify The court ruled that a duty to defend was triggered under the CGL when an insured was alleged to have continued to serve alcohol to visibly intoxicated patrons and then ejected them from the premises in a dangerously inebriated condition

LIQUOR CGL COURT CASES McGuire v. Curry (S.D. 2009)

LIQUOR CGL COURT CASES McGuire v. Curry (S.D. 2009) The underage employee of a racetrack was hired as a runner to deliver alcohol and other supplies to the racetrack's concession stands and bars The racetrack gave the underage employee a key to its alcohol storage facility. No one monitored the employee s access to the alcohol or checked the amount of alcohol sold or used on any given night.

LIQUOR CGL COURT CASES McGuire v. Curry (S.D. 2009) One day, after the underage employee's shift ended, he drove his vehicle off the racetrack s premises while intoxicated and struck the plaintiff, who was a passenger on a motorcycle. The underage employee subsequently admitted drinking while on the job. The plaintiff brought a suit against the racetrack alleging negligent hiring, retention and supervision of the underage employee

LIQUOR CGL COURT CASES McGuire v. Curry (S.D. 2009) The Court concluded that the racetrack had a duty to supervise the underage employee It was foreseeable that, with no supervision & free access to consume alcohol, he could abuse the alcohol and leave the premises unfit to drive The court ruled that the employer could be held liable for the actions of its underage employee & the liquor exclusion would not apply

LIQUOR CGL COURT CASES Essex Insurance Company v. Café Dupont, LLC (D.D.C. 2009)

LIQUOR CGL COURT CASES Essex Insurance Company v. Café Dupont, LLC Essex was seeking a declaration that it had no duty under the CGL policy to defend or indemnity the insured The suit alleged, in part, that the insured generally failed to prevent a patron from becoming intoxicated and allowed the intoxicated patron to leave and not detaining him or arranging alternative transportation.

LIQUOR CGL COURT CASES Essex Insurance Company v. Café Dupont, LLC The nightclub operator's separate liquor liability policy had lapsed before the accident and coverage was sought under the insured's CGL policy

LIQUOR CGL COURT CASES Essex Insurance Company v. Café Dupont, LLC The CGL contained a provision in the liquor liability exclusion that excluded damages or injuries that arose out of any act or omission by the insured or any employee of the insured regarding: "providing or failing to provide transportation detaining or failing to detain any person, or any act assuming or not assuming responsibility for the well being, supervision or care of any person allegedly under the influence of alcohol."

LIQUOR CGL COURT CASES Essex Insurance Company v. Café Dupont, LLC The court stated that the quoted provision clearly applied to injuries arising out of failure to detain anyone or the failure to provide transportation for any intoxicated person and not merely those who become intoxicated at the nightclub.

LIQUOR CGL COURT CASES Simmons v. Homatas (Ill. 2010)

LIQUOR CGL COURT CASES Simmons v. Homatas (Ill. 2010) The court considered 2 issues related to: 1. Is a business that allows its patrons to bring their own alcoholic beverages, (a.k.a. BYOB) "in the business of selling alcoholic beverages?" 2. Can it be liable for injuries that arise, not as a result of serving alcohol, but as a result of actions in connection with allowing patrons to consume alcohol, brought onto its premises?

LIQUOR CGL COURT CASES Simmons v. Homatas (Ill. 2010) Two gentlemen arrived at Diamonds Gentlemen s Club (Diamonds or the club), which is operated by defendant On Stage Productions, Inc. On Stage operates Diamonds as a fully nude strip club. The club is located in Du Page County, which prohibits clubs featuring nude dancing from receiving a license to serve alcohol.

LIQUOR CGL COURT CASES Simmons v. Homatas (Ill. 2010) As a result, Diamonds does not serve alcohol to its patrons. However, it does allow patrons to bring their own alcohol. Diamonds also sells glasses, ice, soft drinks and other mixers for making alcoholic drinks.

LIQUOR CGL COURT CASES Simmons v. Homatas (Ill. 2010) The two men had brought with them a fifth of rum and a fifth of vodka. Over the course of the next two hours, the two men poured several drinks. They purchased mixers, glasses and ice from the club.

LIQUOR CGL COURT CASES Simmons v. Homatas (Ill. 2010) One of the gentlemen, within 15 minutes of exiting the club, drove his vehicle and collided with a vehicle driven by April Simmons. The collision resulted in the deaths of Simmons, and Simmons' unborn daughter, Addison Elizabeth Simmons.

LIQUOR CGL COURT CASES Simmons v. Homatas (Ill. 2010) 1. On Stage argued that the Dram shop Act is the sole remedy for actions involving liability from alcoholrelated injuries, thereby precluding plaintiffs' common law claims. 2. On Stage argued that because the Dram shop Act applies only to businesses engaged in the sale or gift of alcohol, the Dram shop Act does not extend liability to On Stage as a result of its policy of not selling or serving alcohol to its patrons.

LIQUOR CGL COURT CASES Simmons v. Homatas (Ill. 2010) In the suit against the operator (defendant) of a BYOB, the Court concluded that the plaintiff s common law negligence claim(s) were not preempted by the specific Dram Shop laws of the state. The court also stated that the operator is not in the business of selling liquor in the state as the club did not provide alcohol, even though it provided glasses and ice to its patrons.

COVERAGE A LIQUOR - Exclusion EXPLANATION OF CHANGES: In response to the above mentioned court decisions related to claims of negligence by an insured, ISO is incorporating two revisions to the Liquor Liability exclusion

COVERAGE A EXCLUSIONS LIQUOR LIABILITY Looks Like the old versions: Coverage is excluded for: (1) Causing or contributing to the intoxication of any person; (2) The furnishing of alcoholic beverages to a person under the legal drinking age or under the influence of alcohol; or (3) Any statute, ordinance or regulation relating to the sale, gift, distribution or use of alcoholic beverages.

COVERAGE A LIQUOR Exclusion EXPLANATION OF CHANGE #1: The exclusion will explicitly state that the Liquor Liability exclusion applies even if the claims against any insured allege the negligence or other wrong doing for liability connected with liquor, but not strictly due to the service of liquor

COVERAGE A LIQUOR Exclusion CHANGE #1: This exclusion applies even if the claims against any insured allege negligence or other wrongdoing in: (a) The supervision, hiring, employment, training or monitoring of others by that insured; or (b) Providing or failing to provide transportation with respect to any person that may be under the influence of alcohol; if the "occurrence" which caused the "bodily injury" or "property damage", involved that which is described in Paragraph (1), (2) or (3) above.

COVERAGE A LIQUOR Exclusion EXPLANATION OF CHANGE #2: Also, the exclusion is being revised to provide that for the purposes of the exclusion permitting a person to bring alcoholic beverages for consumption on an insured's premises (e.g. a BYOB establishment), whether or not a fee is charged or a license is required for such activity, is not by itself, considered the business of selling, serving or furnishing alcoholic beverages.

COVERAGE A LIQUOR Exclusion CHANGE #2: However, this exclusion applies only if you are in the business of manufacturing, distributing, selling, serving or furnishing alcoholic beverages. For the purposes of this exclusion, permitting a person to bring alcoholic beverages on your premises, for consumption on your premises, whether or not a fee is charged or a license is required for such activity, is not by itself considered the business of selling, serving or furnishing alcoholic beverages.

COVERAGE A LIQUOR Exclusion IMPACT: With respect to the exclusion being revised to address BYOBs, this change may be considered a broadening in coverage With respect to the other revisions to the exclusion, the change may be considered a reduction in coverage

ROBIN FEDERICI, CPCU, AAI, ARM, AINS, AIS, CPIW