Monticello Ins. v. Mike's Speedway Lounge

• Decision Date: 05 August 1996
• Docket Number: Cause No. IP 95-1067-C H/G.
• Citation: Monticello Ins. v. Mike's Speedway Lounge, 949 F.Supp. 694 (S.D. Ind. 1996)
• Parties: MONTICELLO INSURANCE COMPANY, Plaintiff, v. MIKE'S SPEEDWAY LOUNGE, INC., Michelle Gaines, as personal representative of Ronnie Woodard, Deceased, Defendants.
• Court: U.S. District Court — Southern District of Indiana

949 F.Supp. 694

MONTICELLO INSURANCE COMPANY, Plaintiff, v.MIKE'S SPEEDWAY LOUNGE, INC., Michelle Gaines, as personal representative of Ronnie Woodard, Deceased, Defendants.

Cause No. IP 95-1067-C H/G.

United States District Court, S.D. Indiana, Indianapolis Division.

August 5, 1996.

Thomas J. Campbell, Locke Reynolds Boyd & Weisell, Indianapolis, IN, for plaintiff.

Jack Crawford, Crawford & Rader, Indianapolis, IN, for defendantMike's Speedway Lounge, Inc.

Steven A. Spence, Indianapolis, IN, for defendantMichelle Gaines.

ENTRY ON MOTION FOR SUMMARY JUDGMENT

HAMILTON, District Judge.

The central issue in this case is whether an insurance company may sell to a tavern a general commercial liability insurance policy that excludes coverage for losses "arising out of or in connection with the manufacturing, selling, distributing, serving of furnishing of any alcoholic beverages."As explained below, the court concludes that under Indiana law, this exclusion rendered the purchased liability "coverage" illusory.The plaintiff insurer's motion for summary judgment is therefore denied.

Facts

PlaintiffMonticello Insurance Company("Monticello") sold insurance to Mike's Speedway Lounge, Inc.("Mike's"), a neighborhood tavern.Monticello contracted with Mike's to provide commercial general liability coverage from August 17, 1993 to August 17, 1994.On July 24, 1994, Ronnie Woodard and David Smith were patrons at Mike's.In the early morning hours of July 25, 1994, Smith attacked and killed Woodard in the parking lot adjacent to Mike's.Ronnie Woodard's personal representative, Michelle Gaines("Gaines"), filed suit against Mike's in the Marion Superior Court on July 14, 1995.On August 11, 1995, Monticello filed its complaint for declaratory judgment.Monticello seeks a judgment from this court declaring that the policy it issued to Mike's affords no insurance coverage to Mike's for any injuries or damages alleged by Gaines in the suit that Gaines filed against Mike's.

Monticello's original insurance policy for Mike's carried effective dates of August 17, 1993 through August 17, 1994.¹(Monticello issued a renewal policy effective from August 17, 1994 through August 17, 1995.)The original Monticello policy provided commercial general liability coverage and described Mike's business as follows: "Restaurant — with sale of alcoholic beverages that are less than 75% of total annual gross receipts — without dance floor."The insurance policy also refers to Mike's as a "restaurant and bar."Monticello collected from Mike's an annual premium of $1,751.25.Of the annual premium, $910 was attributed to commercial general liability coverage.Monticello's policy also provided commercial property coverage and commercial crime coverage to Mike's.

Monticello argues that three exclusions contained in the governing policy apply to prevent insurance coverage in the case brought by Gaines against Mike's.The first is the "assault and battery" exclusion:

ASSAULT AND BATTERY EXCLUSION

It is agreed that the insurance does not apply to bodily injury or property damage arising out of assault & battery or out of any act or omission in connection with the prevention or suppression of such acts, whether caused by or at the instigation or direction of the insured, his employees, patrons or any other person.

The assault and battery exclusion is located on an endorsement page preceding the main body of the insurance policy.Effective endorsements are listed on declarations pages at the beginning of the policy by reference to code numbers found at the bottom left corner of each endorsement.The assault and battery exclusion endorsement contains the code, M4018 and appears at page 14 of Hannah Exhibit A.

The second exclusion is the "absolute liquor" exclusion:

EXCLUSION — ABSOLUTE LIQUOR

In consideration of the premium charged, it is understood and agreed that coverage under this policy does not apply to bodily injury nor property damage, arising out of or in connection with the manufacturing, selling, distributing, serving or furnishing of any alcoholic beverages.

The absolute liquor exclusion is also an endorsement preceding the body of the policy.The absolute liquor exclusion carries the code, M4005 and appears at page 14 of Hannah Exhibit A.

The third exclusion is the "dram shop" exclusion:

2. Exclusions.

This insurance does not apply to:

* * * * * *

c. "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, serving or furnishing alcoholic beverages.

Unlike the other two exclusions at issue, the dram shop exclusion is found within the main body of the insurance policy, at page 31 of Hannah Exhibit A.

Gaines filed suit in Marion Superior Court against Mike's setting forth three separate counts.First, Gaines alleged that Mike's was negligent in "failing to have and to keep its business premises in a reasonably safe condition."Second, Gaines alleged that Mike's furnished alcoholic beverages to Smith when Smith was visibly intoxicated, and that Smith then "killed, battered and beat Ronnie Woodard until he died."Third, Gaines alleged that Mike's, by and through its employees, became aware that Woodard was being beaten on its premises and negligently failed to protect Woodard from further harm.

Standard for Summary Judgment

Summary judgment should be granted when there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law.Fed.R.Civ.P. 56(c).A genuine issue of material fact exists if there is sufficient evidence for a jury to find in favor of the non-moving party on the particular issue.E.g., Methodist Medical Ctr. v. American Medical Sec. Inc.,38 F.3d 316, 319(7th Cir.1994).Interpretation of a written contract, such as a contract of insurance, is ordinarily a question of law suitable for resolution on motion for summary judgment.E.g., Tate v. Secura Ins.,587 N.E.2d 665, 668(Ind.1992);Wayne Township Bd. of Sch. Comm'rs v. Indiana Ins. Co.,650 N.E.2d 1205, 1208(Ind.App.1995);accord, Hurst-Rosche Eng'rs, Inc. v. Commercial Union Ins. Co.,51 F.3d 1336, 1342(7th Cir.1995).When the question presented is whether an insurance policy provides liability coverage for a particular claim or lawsuit, the central material facts are ordinarily the terms of the written contract and the contents of the plaintiff's allegations in the underlying litigation.E.g., Wayne Township Bd. of Sch. Comm'rs,650 N.E.2d at 1208.Here the parties do not dispute the contents of the allegations in the suit filed by Gaines.The parties disagree about the legal conclusions to be drawn from the terms of insurance contract as applied to the underlying lawsuit.Gaines also asserts there is a factual dispute concerning the contents of the policy in effect on July 24, 1994.Mike's asserts there are factual disputes concerning Mr. Lewis' reasonable expectation as to the insurance coverage he purchased from Monticello.

Contents of the Insurance Policy

In response to Monticello's motion for summary judgment, Gaines pursues only one line of argument.Gaines disputes whether the insurance policy in effect on July 24-25, 1994, contained the absolute liquor and assault and battery exclusions.Mike's has not raised this issue.In fact, in its original answer, Mike's admitted that the policy attached as Exhibit A to Monticello's complaint was a true and accurate copy of the policy in effect at all relevant times.(Mike's Answer¶ 5)In an amended answer, Mike's later stated that it was without sufficient knowledge or belief to determine whether Exhibit A to Monticello's complaint was a true and accurate copy of the pertinent provisions of the policy.(Mike's Amended Answer¶ 5)On Monticello's motion for summary judgment, Mike's argues that the absolute liquor exclusion renders coverage under the policy illusory.Mike's sole argument in response to the motion for summary judgment depends on the presence of the absolute liquor exclusion in the policy.

The co-defendants in this case have taken different and contradictory paths in their efforts to defeat Monticello's motion for summary judgment.Mike's argues that the absolute liquor exclusion renders the general liability insurance coverage illusory.With the aid of an affidavit from Richard Lewis, the owner of Mike's, Gaines argues that the absolute liquor and assault and battery exclusions were not even a part of the contract for insurance that was in effect at the relevant time.Thus, before reaching the illusory coverage issue, the court must first consider whether the policy contained the absolute liquor and assault and battery exclusions.

As noted above, the absolute liquor and assault and battery exclusions appear in the documents submitted by Monticello as endorsements following the declarations pages and preceding the body of the insurance policy.They do not appear in the policy attached as an exhibit to the Affidavit of Richard Lewis submitted by Gaines.Gaines argues that the assault and battery and absolute liquor exclusions were not part of the policy in effect from August 17, 1993 to August 17, 1994, but were added as endorsements to the renewal policy, which was effective from August 17, 1994 to August 17, 1995.Monticello tries to avoid the issue by suggesting that because Mike's and Monticello signed a contract for renewal of insurance on July 5, 1994, Mike's "thereby became the insured on Renewing PolicyNo. MCK 610963, with a policy period from August 17, 1994 to August 17, 1995."(Monticello's Opening Brief...