Colony Ins. Co. v. Aspen Specialty Ins. Co.

• Decision Date: 30 September 2021
• Docket Number: Civil Action No. 20-cv-09446-JHR-JS
• Citation: 564 F.Supp.3d 343
• Parties: COLONY INSURANCE COMPANY, Plaintiff, v. ASPEN SPECIALTY INSURANCE COMPANY; American Guarantee and Liability Insurance Company; Hospitality Supportive Systems, LLC; Dive Bar Diva, LLC t/a the Alibi Room, Defendants.
• Court: U.S. District Court — District of New Jersey

564 F.Supp.3d 343

COLONY INSURANCE COMPANY, Plaintiff,

v.ASPEN SPECIALTY INSURANCE COMPANY; American Guarantee and Liability Insurance Company; Hospitality Supportive Systems, LLC; Dive Bar Diva, LLC t/a the Alibi Room, Defendants.

Civil Action No. 20-cv-09446-JHR-JS

United States District Court, D. New Jersey.

Signed September 30, 2021

William F. Stewart, Stewart Smith, West Conshohocken, PA, for Plaintiff.

J. Christopher Henschel, Connell Foley LLP, Roseland, NJ, William Douglas Deveau, Connell Foley LLP, Jersey City, NJ, for Defendant Aspen Specialty Insurance Company.

Marc Zucker, Weir & Partners, Cherry Hill, NJ, for Defendant Hospitality Supportive Systems, LLC.

Robert Drew Fischer, Bodell Bove LLC, Philadelphia, PA, for Defendant American Guarantee and Liability Insurance Company.

Joseph H. Rodriguez, USDJ

Defendant Aspen Specialty Insurance Company ("Aspen") issued an insurance policy to Defendant Hospitality Supportive Services, LLC ("HSS") stating that $1 million is "the most that [Aspen] will pay" to insure liquor liability claims (the "Aspen Policy"). In the motions for judgment on the pleadings presently before the Court, excess insurers Colony Insurance Company ("Colony") and American Guarantee and Liability Insurance Company ("AGLIC") ask the Court to declare that Aspen must insure more than $1 million in liquor liability claims. [Dkt. 43; Dkt. 46]. For the reasons set forth below, the Court declines to do so and will deny both motions.

I. Background

Colony, Aspen, and AGLIC issued insurance policies to HSS, an insurance purchasing group that administers a shared-risk insurance program for hospitality and restaurant industry businesses (the "Shared Risk Program"). [Dkt. 1, Compl. ¶ 21]. Approximately 205 businesses subscribe to and receive insurance coverage through the Shared Risk Program ("Subscribers"). [Dkt. 6 at 7]. For the period from June 13, 2015 to December 13, 2016, Aspen provided the primary insurance policy for the Shared Risk Program, Colony provided an excess insurance policy (the "Colony Policy"), and AGLIC provided a third policy excess to both the Aspen Policy and the Colony Policy (the "AGLIC Policy"). [Compl. ¶ 31; Dkt. 43-2 at 15 n.1]. Each policy requires the respective insurer to defend and indemnify Shared Risk Program participants in litigation concerning certain covered events. [Compl. ¶¶ 24, 27, 32]. The Colony Policy states that Colony's coverage obligations kick in after "proper exhaustion of the limits of the underlying Aspen Policy." [Compl. ¶ 31]. Likewise, AGLIC's obligations begin when the Colony Policy's limits are exhausted. [See Dkt. 46-2 at 15]. The parties disagree on the Aspen Policy's coverage limits.

a. The Aspen Policy

Three components of the Aspen Policy are relevant to the present dispute. First is the "Commercial General Liability Declarations" and the "Commercial General Liability Coverage Form," which the Court will refer to collectively as the "Base Policy." The Base Policy establishes a $1 million coverage limit for "each occurrence" and a $2 million "general aggregate" coverage limit for covered events. [Dkt. 43-2 at 4]. The Base Policy's "Commercial General Liability Coverage Form" defines events and injuries to which the Base Policy's coverage limits apply. Section I-Coverage A of the "Commercial General Liability Coverage Form" contains an exclusion which states

2. Exclusions

This insurance does not apply to:

***

c. Liquor Liability

"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 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.

("Liquor Exclusion"). [Dkt. 43-2 at 11].

The other two relevant components are endorsements that amend the Base Policy. The Liquor Liability Extension Endorsement ("Liquor Endorsement") amends the Base Policy's Liquor Exclusion specifically. It states that the Liquor Exclusion "shall not apply to the extent of the coverage provided by this Endorsement." [Dkt. 43-2 at 84]. It further states the following:

Additional Paragraph 1.

The Liquor General Aggregate Limit set forth in the Schedule of this Endorsement is the most we will pay under this policy for all damages because of all "bodily injury" and "property damage" included within the "liquor hazard" that is sustained by one or more persons or organizations.

Additional Paragraph 2.

Subject to Additional Paragraph 1. above, the Liquor Each Location Aggregate Limit set forth in the Schedule of this Endorsement is the most we will pay under this policy for all damages because of "bodily injury" and "property damage" included within the "liquor hazard" that is sustained by one or more persons or organizations as the result of the selling, serving or furnishing of any alcoholic beverage(s) at a location to which this insurance applies.

Additional Paragraph 3.

Subject to Additional Paragraph 1. & 2. above, the Liquor Each Location Occurrence Limit set forth in the Schedule of this Endorsement is the most we will pay under this policy for damages because of "bodily injury" and "property damage" included within the "liquor hazard" at each location to which this insurance applies, that is sustained by one or more persons or organizations as the result of the selling, serving or furnishing of any alcoholic beverage(s) to any one person.

"Liquor hazard" means all "bodily injury" and "property damage" arising out of the selling, servicing or furnishing of any alcoholic beverage(s).

[Dkt. 43-2 at 84–85]. The Liquor Endorsement also contains the following schedule:

SCHEDULE
LIQUOR EACH LOCATION OCCURRENCE LIMIT:	$1,000,000
LIQUOR EACH LOCATION AGGREGATE LIMIT:	$1,000,000
LIQUOR GENERAL AGGREGATE LIMIT:	$1,00 0,000 [sic]

ALL OTHER TERMS, CONDITIONS, AND EXCLUSIONS REMAIN UNCHANGED.

[Id. ].

Finally, the "Designated Location(s) General Aggregate Limit" endorsement ("All Subscribers Aggregate") sets aggregate coverage limits for each Subscriber and for all Subscribers collectively. It states

A. Limits of Insurance in the General Liability Declarations are amended to include the following Limit: Combined Total Aggregate Limit Cap: $10,000,000

B. For all sums which the insured becomes legally obligated to pay as damages caused by "occurrences" under Section I-Coverage A ... which can be attributed only to operations at a single designated "location" shown in the Schedule above:

1. A separate Designated Location General Aggregate Limit applies to each designated "location", and such limit is equal to the amount of the General Aggregate Limit shown in the Declarations, provided that the Combined Total Aggregate Limit Cap is the most we will pay under this Coverage Part for the sum of all Limits of Insurance as set forth in SECTION III, regardless of the number of your designated "locations" shown above in the schedule.

....

[Dkt. 43-2 at 86]. The "Designated Locations" are defined by reference to "bordereaus on file with company." [Id. ]. The parties agree that the bordereau is the list of Subscribers. [Dkt. 43-1 at 13; Dkt. 52 at 23]. The parties also agree that, under the All Subscribers Aggregate, Aspen must cover $10 million at most for all claims against all Subscribers, and up to $2 million in aggregate claims against each Subscriber.¹

b. The Underlying DBD Litigation and the Present Dispute

One Subscriber was Defendant Dive Bar Diva ("DBD") which owns and operates The Alibi Room, a bar located on the White Horse Pike in Waterford, New Jersey. [Compl ¶ 7]. Since October 17, 2019, DBD has been the defendant in a wrongful death and survival action in the New Jersey Superior Court (the "DBD Litigation"). [Compl. ¶ 13]. Plaintiff in the DBD Litigation is the surviving wife of a deceased Alibi Room patron. She alleges that, on February 19, 2016, Alibi Room staff served her husband past the point of intoxication, and that DBD's conduct caused her husband to crash his car in a fatal accident after leaving the Alibi Room. [Compl. ¶¶ 14–19]. Trial in the DBD Litigation commences on March 21, 2022. [Dkt. 61].²

Pursuant to the Aspen Policy, Aspen has defended the DBD Litigation and claims against other Subscribers. [See Compl. ¶¶ 38–39]. In an August 29, 2019 letter to Colony, Aspen advised that "the $1 million liquor liability aggregate limit of the Aspen Policy is nearing exhaustion in connection with various liquor liability claims throughout the HSS Program." [Dkt. 4, Compl. Exh. D]. Aspen advised Colony, HSS, and other insureds that they should begin to coordinate "further handling of the [DBD Litigation] and other pending liquor liability claims...." [Id. ]. Central to this matter is Aspen's position that it must only insure the first $1,000,000 in aggregate liquor liability claims against all 205 Subscribersf.

Colony responded by stating that the Aspen Policy requires Aspen to insure "each location" for the first $1,000,000 in liquor liability claims and must provide $10,000,000 in aggregate liquor liability coverage. [Dkt. 4, Compl. Exh. F]. Aspen repeated its position in a November 18, 2019 response letter to Colony and indicated that "the coverage available under the Aspen Policy appears to be insufficient to fully cover the [DBD Litigation]." [Dkt. 4, Compl. Exh. G].

Colony filed this lawsuit seeking, among other things, a declaration that Aspen must provide $1 million in liquor...