BLG ENTERPRISES v. FIRST FINANCIAL

• Decision Date: 08 March 1999
• Docket Number: No. 24913.,24913.
• Citation: 334 S.C. 529,514 S.E.2d 327
• Court: South Carolina Supreme Court
• Parties: B.L.G. ENTERPRISES, INC. d/b/a The Alley Bar, Plaintiff, v. FIRST FINANCIAL INSURANCE COMPANY; Connie K. Smith and Larry James; as co-conservators of Tina D. James; and Beverly Ann Wetterman, Defendants, of whom Connie K. Smith and Larry James, as co-conservators of Tina D. James, are Petitioners, and First Financial Insurance Company is Respondent.

334 S.C. 529

514 S.E.2d 327

B.L.G. ENTERPRISES, INC. d/b/a The Alley Bar, Plaintiff, v. FIRST FINANCIAL INSURANCE COMPANY; Connie K. Smith and Larry James; as co-conservators of Tina D. James; and Beverly Ann Wetterman, Defendants, of whom Connie K. Smith and Larry James, as co-conservators of Tina D. James, are Petitioners, and First Financial Insurance Company is Respondent.

No. 24913.

Supreme Court of South Carolina.

Heard February 2, 1999.

Decided March 8, 1999.

Steven M. Krause, of Law Offices of Steven M. Krause, P.A., of Anderson, for petitioners.

Phillip E. Reeves and Jennifer E. Johnsen, of Gibbes, Gallivan, White & Boyd, P.A., of Greenville, for respondent.

Robert L. Waldrep, Jr., of Waldrep and Stoddard, of Anderson, for B.L.G. Enterprises, Inc.

BURNETT, Justice:

We granted a writ of certiorari to review the decision of the Court of Appeals in B.L.G. Enterprises, Inc. v. First Financial Ins. Co., 328 S.C. 374, 491 S.E.2d 695 (Ct.App.1997). We affirm.

FACTS

B.L.G. Enterprises, Inc. d/b/a The Alley Bar (BLG), instituted this declaratory judgment action against Respondent First Financial Insurance Company (First Financial) to determine whether First Financial owed it a duty to defend and indemnify BLG in the underlying tort action brought by Connie K. Smith and Larry James (Conservators) as co-conservators of Tina D. James. Conservators' underlying complaint alleged employees of BLG negligently served Beverly Ann Wetterman alcoholic beverages while she was visibly intoxicated and allowed her to leave the bar and drive a motor vehicle. It is alleged Ms. Wetterman ran a red light and collided with the car being driven by Ms. James, causing Ms. James severe physical and mental injuries.

At the time of the accident, BLG maintained insurance with First Financial. First Financial argued, however, the insurance policy specifically excluded coverage for dram shop liability. Conservators argued 1) an endorsement to the original policy provided dram shop liability coverage or 2) the endorsement created an ambiguity in the policy's coverage and, therefore, the policy is deemed to provide dram shop liability coverage. The master-in-equity ruled in favor of BLG and Conservators. Finding the endorsement did not apply to the dram shop liability exclusion and, hence, did not conflict with the policy, the Court of Appeals reversed. Id. The Court granted Conservators' petition for a writ of certiorari.¹

ISSUE

Did the Court of Appeals err by holding First Financial had no duty to defend and indemnify BLG in the underlying suit?

DISCUSSION

At the time of the underlying accident, BLG had insurance with First Financial. The insurance policy consisted of two coverages: "Owners', Landlords', and Tenants' Liability Insurance" and "Completed Operations and Products Liability Insurance."² Both coverages describe BLG's premise—operations as "taverns" and products as "tavern." In relevant part, the "Completed Operations and Products Liability Insurance" provides:

COVERAGE A—BODILY INJURY LIABILITY

COVERAGE B—PROPERTY DAMAGE LIABILITY

The company will pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of

A. bodily injury or

B. property damage

to which this insurance applies, caused by an occurrence, if the bodily injury or property damage is included within the completed operations or the products hazard, and the company shall have the right and duty to defend any suit against the insured seeking damages on account of such bodily injury or property damage, ....

Exclusions

This insurance does not apply:

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

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

(2) if not so engaged, as an owner or lessor of premises used for such purposes, if such liability is imposed

(I) by; or because of the violation of, any statute; ordinance or regulation pertaining to the sale, gift, distribution or use of any alcoholic beverage, or

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

but part (ii) of this exclusion does not apply with respect to liability of the insured as an owner or lessor described in (2) above;³

(underline added).

Originally, the insurance policy defined "products hazard" as follows:

"Products hazard" includes bodily injury and property damage arising out of the named insured's products or reliance upon a representation or warranty made at any time with respect thereto, but only if the bodily injury or property damage occurs away from the premises owned by or rented to the named insured and after physical possession of such products has been relinquished to others;

(underline added).

An endorsement to the policy provides:

PRODUCTS HAZARD REDEFINED

This endorsement modifies such insurance as is afforded by the policy relating to the following:

COMPREHENSIVE GENERAL LIABILITY INSUANCE COMPLETED OPERATIONS AND PROUCTS LIABILITY INSURANCE

It is agreed that with respect to bodily injury or property damage arising out of the named insured's products manufactured, sold, handled or distributed

(1) on, from or in connection with the use of any premises described in this endorsement, or

(2) in connection with the conduct of any operation described in this endorsement, when conducted by or on behalf of the named insured, the definition of "products hazard" is amended to read as follows:

"products hazard" includes bodily injury and property damage arising out of (a) the named insured's products or (b) reliance upon a representation or warranty made with respect thereto; but only if the bodily injury or property damage occurs after physical possession of such products has been relinquished to others;

I.

Conservators maintain the dram shop exclusion should not be enforced because it effectively bars all liability coverage for injury due to the sale of alcohol which, as a tavern, is the very coverage BLG sought to acquire. They further assert, because BLG is a tavern, the language of the policy and dram shop exclusion is ambiguous and, therefore, should be construed in favor of coverage. We disagree.

It is well settled that an insurer's duty to defend is based on the allegations of the underlying complaint. Federated Mut. Ins. Co. v. Piedmont Petroleum Corp., 314 S.C. 393, 444 S.E.2d 532 (Ct.App.1994). A liability insurer must defend any suit alleging bodily injury or property damage seeking damages payable under the terms of the policy. Sloan Constr. Co. v. Central Nat'l Ins. Co. of Omaha, 269 S.C. 183, 236 S.E.2d 818 (1977); Nationwide Mut. Ins. Co. v. Tate, 313 S.C. 444, 438 S.E.2d 266 (Ct.App.1993). However, an insurer has no duty to defend an insured where the damage was caused for a reason unambiguously excluded under the policy. Federated Mut. Ins. Co. v. Piedmont Petroleum Corp., supra; Falkosky v. Allstate Ins. Co., 311 S.C. 369, 429 S.E.2d 194 (Ct.App.1993), affd as modified, 312 S.C. 210, 439 S.E.2d 836 (1993).

Insurance policies are subject to the general rules of contract construction. Diamond State Ins. Co. v. Homestead Industries, Inc., 318 S.C. 231, 456 S.E.2d 912 (1995); Sloan Constr. Co. v. Central Nat'l Ins. Co., supra. This Court must give policy language its plain, ordinary, and popular meaning. Fritz-Pontiac-Cadillac-Buick v. Goforth, 312 S.C. 315, 440 S.E.2d 367 (1994). When a contract is unambiguous, clear, and explicit, it must be construed according to the terms the parties have used. C.A.N. Enterprises, Inc. v. S.C. Health & Human Services Finance Comm'n, 296 S.C. 373, 373 S.E.2d 584 (1988). The court's duty is "limited to the interpretation of the contract made by the parties themselves `regardless of its wisdom or folly, apparent unreasonableness, or failure [of the parties] to guard their interests carefully.'" 296 S.C. at 378, 373 S.E.2d at 587, citing Gilstrap v. Culpepper, 283 S.C. 83, 86, 320 S.E.2d 445, 447 (1984).

Although exclusions in an insurance policy are construed against the insurer, Boggs v. Aetna Cas. and Sur. Co., 272 S.C. 460, 252 S.E.2d 565 (1979), insurers have the right to limit their liability and to impose conditions on their obligations provided they are not in contravention of public policy or a statutory prohibition. Burns v. State Farm Mut. Auto. Ins. Co., 297 S.C. 520, 377 S.E.2d 569 (1989); Rhame v. Nat'l Grange Mut. Ins. Co., 238 S.C. 539, 121 S.E.2d 94 (1961). "Policies providing products liability coverage may contain exclusions, tailored to the business of the particular insured, designed to limit the insurer's risk exposure from hazards peculiar to that business." Couch on Insurance 3d, § 130:14 (1997).

The policy issued to BLG, a tavern, is not illusory. The Owners', Landlords', and, Tenants' portion of the policy initially provides liability coverage for an occurrence arising out of use of BLG's premises. Exclusion h, however, specifically precludes coverage for bodily injury "by reason of the selling, serving or giving of any alcoholic beverage." (underline added). Other coverage, however, remains intact. For instance, the policy provides liability coverage for a patron who slips and falls at the tavern. The policy even provides coverage to an intoxicated patron who slips and falls at the tavern, so long as the slip and fall was not the result of the service of alcohol. See Excelsior Ins. Co. v. Pomona Park Bar & Package Store, 369 So.2d 938 (Fla.1979).

Similarly, the Completed Operations and Products Hazard portion of the policy initially provides coverage for products liability, including the distribution of a "defective" alcoholic beverage. Exclusion b, however, specifically precludes coverage for bodily injury "by reason of the selling, serving or giving of any alcoholic beverage."...