American Legion Post No. 49 v. Jefferson Ins. Co. of New York

• Decision Date: 30 November 1984
• Docket Number: No. 84-066,84-066
• Citation: 125 N.H. 758,485 A.2d 293
• Parties: AMERICAN LEGION POST # 49 v. JEFFERSON INSURANCE COMPANY OF NEW YORK et al.
• Court: New Hampshire Supreme Court

Page 293

485 A.2d 293

125 N.H. 758

AMERICAN LEGION POST # 49 v. JEFFERSON INSURANCE COMPANY OF NEW YORK et al.

No. 84-066.

Supreme Court of New Hampshire.

Nov. 30, 1984.

Snierson, McKean & Mattson P.A., Laconia (Edgar D. McKean, III, Laconia, et al on the brief, and Edward B. Mulligan, IV, Concord, orally), for plaintiff.

Sulloway, Hollis & Soden, Concord (James O. Barney, Concord, on the brief and orally), for defendant Jefferson Ins. Co.

DOUGLAS, Justice.

In this declaratory judgment action, we must decide whether a clause in an insurance contract, which excludes from coverage injury resulting from the sale of alcoholic beverages by an organization engaged in the business of selling alcoholic beverages, applies to a non-profit organization which derives substantial revenue from the regular sale of alcohol.

The facts in this case are not in dispute. The plaintiff, American Legion Post # 49 (the Legion) is a private veterans' association granted non-profit status by the federal government for income tax purposes. The Legion operates a bar which sells alcoholic beverages each day and evening and derives substantial profits from these sales. These profits make up the bulk of the Legion's revenue and are used to meet its operating expenses, provide benefits to its members, and fund its social, civic, and community activities.

A suit for damages was filed against the Legion by James Petelle for injuries he sustained on January 26, 1979 as a result of the Legion's alleged negligence in serving alcohol to an intoxicated patron and allowing him to drive away in that condition. The defendant Jefferson Insurance Company (Jefferson), liability insurer of the Legion, declined to provide a defense in that suit. In doing so, it relied upon an exclusionary clause in its policy with the Legion which provides as follows:

"This insurance does not apply ...

(h) to bodily injury or property damage for which the insured or his indemnitee may be held liable

(1) as a person or organization engaged in the business of ... selling or serving alcoholic beverages ...

if such liability is imposed ...

(ii) by reason of the selling, serving, or giving of any alcoholic beverage ... to a person under the influence of alcohol or which causes or contributes to the intoxication of any person ...."

The Legion filed a declaratory judgment action to determine insurance coverage. The Superior Court (Dunn, J.) ruled that the policy exclusion was inapplicable and that Jefferson had a duty to provide a defense for the Legion. We agree.

This case is controlled by Laconia Rod & Gun Club v. Hartford Acc. & Indemn. Co., 123 N.H. 179, 459 A.2d 249 (1983), which interpreted an identical liability exclusion clause. In that case we held that the phrase "engaged in the business of selling or serving alcoholic beverages ..." was ambiguous and that when a term in an insurance contract is ambiguous, it must be resolved against the insurer. Id., 123 N.H. at 182, 459 A.2d at 251; Town of Epping v. St. Paul Fire and Marine Ins. Co., 122 N.H. 248, 252, 444 A.2d 496, 498 (1982).

"Engaged in the business of" has two common meanings. It may mean any regular activity that occupies one's time and attention, with or without direct profit motive, or it can mean an activity with a direct profit objective. Resolving...