Alea London Limited v. Bono-Soltysiak Enterprises

• Decision Date: 17 January 2006
• Docket Number: No. ED 85316.,ED 85316.
• Citation: 186 S.W.3d 403
• Parties: ALEA LONDON LIMITED, Appellant, v. BONO-SOLTYSIAK ENTERPRISES, d/b/a Laclede Street Bar & Grill, Kenneth Weger, and Theresa Weger, Respondents.
• Court: Missouri Court of Appeals

186 S.W.3d 403

ALEA LONDON LIMITED, Appellant, v. BONO-SOLTYSIAK ENTERPRISES, d/b/a Laclede Street Bar & Grill, Kenneth Weger, and Theresa Weger, Respondents.

No. ED 85316.

Missouri Court of Appeals, Eastern District, Division One.

January 17, 2006.

Motion for Rehearing and/or Transfer to Supreme Court Denied March 2, 2006.

Application for Transfer Denied April 11, 2006.

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Laurel Stevenson, Nikki Cannezzaro, Springfield, MO, for Appellant.

Frank N. Carter, Jr., St. Louis, Elkin L. Kistner, Adam R. Lorenz, Clayton, MO, for Respondent.

PATRICIA L. COHEN, Judge.

Introduction

Alea London Limited appeals from a judgment in favor of Bono-Soltysiak Enterprises d/b/a Laclede Street Bar and Grill ("Laclede Street"), Kenneth Weger and Theresa Weger ("the Wegers") on Alea London's First Amended Petition for Declaratory Judgment and/or Reformation and Judgment on an Insurance Policy. We affirm.

Statement of the Facts and Proceedings Below

Alea London, a surplus lines insurer based in London, England, commenced covering Laclede Street on December 20, 2001.¹ Evidence of the coverage was contained in a document faxed by Jaeger + Haines, Alea London's Arkansas broker and general agent, to Midwest Agency, Laclede Street's insurance broker. This document contained, among other things, a written description of the amount of the coverage, the premium, and the liability limits. In addition, the document specifically referenced a "condition": "Excludes Assault & Battery."

On January 3, 2002, Michael Metzger, a Laclede Street patron, fatally stabbed Michael Weger in the parking lot of Laclede Street. Mr. Metzger was later convicted of involuntary manslaughter and armed criminal action in connection with Mr. Weger's death. On January 16, 2002, Jaeger + Haines issued the policy to Laclede Street.² The policy identified the effective coverage period as December 20, 2001 to December 20, 2002. The business description found on the common declarations page identified Laclede Street as a restaurant. Likewise, the premium section of the declarations page classified Laclede Street as a restaurant "with no sale of alcoholic beverages — without dance floor."

The January 16 policy included a liquor liability exclusion which provided as follows:

"Bodily injury" or "property damage" for which any insured may be held liable by reason of:

(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.

This exclusion applies only if you are in the business of manufacturing, distributing, selling, securing or furnishing alcoholic beverages.

The policy also contained an attached "Combination Endorsement — 1" ("the Endorsement") which materially altered the policy by, among other things, deleting and replacing the "Expected or Intended Injury" exclusion in the main body of the policy, and provided as follows:

Exclusion — Assault or Battery

Exclusion a. of Coverage A (Section 1) is deleted and replaced with the following:

"Bodily injury" or "property damage":

(1) expected or intended from the standpoint of any insured;

(2) arising out of assault or battery, or out of any act or omission in connection with the prevention or suppression of an assault or battery; or

(3) arising out of charges or allegations of negligent hiring, training, placement or supervision.

On August 22, 2002, Mr. Weger's parents, Kenneth and Theresa Weger, filed a wrongful death suit against Laclede Street.³ Upon being tendered the defense of the lawsuit, Alea London issued a reservation of rights letter agreeing to undertake defense of the lawsuit. Shortly thereafter, Alea London filed a Petition for Declaratory Judgment seeking a determination that the Alea London policy issued to Laclede Street subsequent to Mr. Weger's death did not cover the Wegers' claims. Alea London attached the policy at issue to its Petition. Alea London thereafter moved for summary judgment. Following the trial court's denial of summary judgment, Alea London filed a First Amended Petition, added allegations that it made a mistake in classifying Laclede Street as a "restaurant which did not serve any alcohol" and sought reformation of the policy to show "the proper business description as a restaurant serving less than 75% alcoholic beverages."

At trial, Alea London proffered an expert witness, Peter Hans, to discuss the significance and effect of, among other things, the assault and battery exclusion contained in the Endorsement. Mr. Hans testified that the Endorsement contained language that was standard, but acknowledged there were multiple versions of assault and battery exclusions used in the surplus lines industry. By contrast, Laclede Street offered testimony through its expert, William Hagar, that the language in the Endorsement was not "mainstream" and was "draconian." In addition, Dean Brown, the Midwest Agency broker who obtained the Alea London policy, testified that the surplus lines industry used several different types of assault and battery exclusions and the binder provided no direction regarding which assault and battery exclusion would be used in the policy. Moreover, the trial court heard testimony that Laclede Street subsequently obtained a surplus lines policy that did not contain the type of restrictive exclusion described in the Endorsement.

Following the trial, the trial court issued a judgment in favor of Laclede Street and the Wegers. The trial court determined that the written document faxed by Jaeger + Haines to Midwest Agency constituted a binder of coverage for Laclede Street for the period of December 20, 2001 until December 20, 2002. The trial court concluded, as a matter of law, that the binder was the "operative insurance contract," acknowledging, however, that in general, a binder may be governed by the terms of a later issued policy "only if the policy in question is a `standard ... of policy,'" [sic] citing Pape v. Mid-America Preferred Insurance Co., 738 S.W.2d 882, 884 (Mo.App. W.D.1987). The trial court declined to incorporate the language contained in the Endorsement into the binder on the grounds, in essence, that the evidence adduced at trial was insufficient to establish that such an exclusion was a standard policy term in the surplus lines industry. The trial court further found that the assault and battery term included in the binder was ambiguous and should be construed against Alea London. Finally, the trial court determined that the binder did not contain a liquor liability exclusion and that the policy, as written, "rendered the alcohol liability exclusion a nullity."

The trial court considered and rejected Alea London's request for reformation of the contract. In particular, the trial court noted that there was no evidence adduced at trial that Laclede Street participated in or contributed to the "mistake." This appeal followed.

Standard of Review

We affirm the judgment of the trial court when there is no substantial evidence to support it, it is against the weight of the evidence or the trial court erroneously declared or applied the law. Murphy v. Carron, 536 S.W.2d 30, 32 (Mo. banc 1976). See also, Knipp v. Truck Ins. Exchange, 857 S.W.2d 281, 284 (Mo.App. W.D.1993)(stating coverage disputes tried to the court are governed by Murphy v. Carron).⁴ We defer to the trial court's factual findings, giving due regard to the trial court's opportunity to judge the credibility of witnesses. Peet v. Randolph, 157 S.W.3d 360, 363 (Mo.App. E.D.2005). We review the evidence and reasonable inferences in the light most favorable to the judgment, disregarding contrary evidence and inferences. Consumer Finance Corp. v. Reams, 158 S.W.3d 792, 795 (Mo.App. W.D.2005). With respect to resolution of contractual ambiguities, we are faced with a question of law and our review is de novo. Leventhal v. Trustmark Ins. Co., 39 S.W.3d 46, 50 (Mo.App. E.D.2001).

Discussion

A. Construction of the Binder

Alea London contends in its first point⁵ that the trial court erred in disregarding the terms, conditions and exclusions contained in the Alea London policy issued on January 16, 2002.⁶ More specifically, Alea London contends the later-issued policy "contains the entire agreement between the parties." Laclede Street and the Wegers contend, inter alia, that: (1) the assault and battery exclusion contained in the policy was not part of the binder because it was not a standard or usual term; (2) the reference in the binder to a "condition" which "excludes assault and battery" was ambiguous and should be construed against Alea London; and (3) the liquor liability exclusion did not apply to Laclede Street because the policy expressly classified Laclede Street as a restaurant.

Missouri courts recognize that parties may enter into a temporary contract of insurance, known as a binder. Hay v. Utica Mut. Ins. Co., 551 S.W.2d 954 (Mo.App.Spring.Dist.1977). A binder may be "sketchy and informal in comparison with the policy contemplated for issuance and delivery in the future, [but] it is a contract of insurance in praesenti, subject only to the conditions which it itself imposes." Couch on Insurance 3d Section 13:1. When a loss occurs after coverage has been bound but before the issuance of a policy, the question of the scope of coverage is resolved by determining the amount of coverage contemplated by the binder. See Hay, 551 S.W.2d at 957 ("suit here is based on the binder not on the policy"); Pape, 738 S.W.2d at 882 ("the issue in the case and the dispute between appellants and respondent was the amount of coverage which the insurance binder provided for silverware"); World Trade Center Properties L.L.C. v. Hartford Fire Ins. Co., 345 F.3d 154, 169 (...