Mt. Hope Inn v. Travelers Indem. Co.

• Decision Date: 27 February 1978
• Citation: 157 N.J.Super. 431,384 A.2d 1159
• Parties: MT. HOPE INN, Plaintiff, v. The TRAVELERS INDEMNITY COMPANY, a Corporation of the State of Connecticut.
• Court: New Jersey Superior Court

Page 431

157 N.J.Super. 431

384 A.2d 1159

MT. HOPE INN, Plaintiff, v. The TRAVELERS INDEMNITY COMPANY, a Corporation of the State

of Connecticut.

Superior Court of New Jersey, Law Division.

Feb. 27, 1978.

Anthony L. Bongiovanni, Denville, for plaintiff.

Robert A. Auerbach, Bloomfield, for defendant (Budd, Larner, Kent, Gross, Picillo & Rosenbaum, Newark, attorneys).

POLOW, J. S. C.

This is a declaratory judgment action in which plaintiff, the insured, seeks a determination of defendant's obligation under a liability policy, to defend a damage claim by a patron injured in plaintiff's tavern, allegedly as a result of an assault by another patron. The injured claimant, one Radwanski, brought an action in tort against both the alleged assailant and the insured Mt. Hope Inn, but defendant disclaimed and refused to defend, relying on a provision excluding liability based upon sale or service of alcohol to an intoxicated person.

The assaulted claimant, Radwanski, in his tort complaint alleged that on June 3, 1975 he sustained injuries from an assault and battery committed by one Trincanello while both were patrons of the Mt. Hope Inn. Radwanski asserted, in a count against plaintiff in his amended complaint in the tort action, that his injuries resulted from the negligence of the Mt. Hope Inn in serving alcohol to Trincanello while he was intoxicated, thereby causing the assault resulting in injuries to Radwanski. The same count also alleged, in a separate paragraph, that the Inn, its agents or servants, knew that Trincanello was intoxicated or should have known it, and thereby failed to protect Radwanski from being assaulted. Upon receiving the Radwanski complaint, Mt. Hope submitted it to the carrier, Travelers, for the purpose of providing its defense pursuant to a liability insurance policy then in effect. After an initial investigation, Travelers determined that the Radwanski action did not fall within the scope of its policy and refused to provide a defense. Mt. Hope thus here seeks a declaration that Travelers is liable for reasonable counsel fees incurred in the defense of Radwanski's suit for damages. Mt. Hope Inn also asserted a claim for coverage for any damages which might be awarded to Radwanski against the insured, but that issue is now moot, the trial judge in the tort action having dismissed the complaint against Mt. Hope Inn at the end of Radwanski's case. Nonetheless, if the Radwanski complaint falls within the scope of insurance coverage provided to Mt. Hope Inn by Travelers, the insured would have been entitled to a defense of the tort action.

The applicable coverage section of the subject insurance policy provides:

A. Insuring Agreement

1. Comprehensive General Liability Coverage A. (Bodily Injury * * *-

The Travelers 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 * * * to which this insurance applies, caused by an occurrence.

The Travelers shall have the right and duty to defend any suit against the Insured seeking damages on account of such bodily injury * * *, even if any of the allegations of the suit are groundless, false or fraudulent, and may make such investigation and settlement of any claim or suit as it deems expedient, but The Travelers shall not be obligated to pay any claim or judgment or to defend any suit after the applicable limits of The Travelers' Liability has been exhausted by payment of judgments or settlements.

However, the policy also contains the following exclusion:

Coverage A (does) not apply to: (f) bodily injury * * * 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 purpose; 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 intoxification 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.

Travelers claims that the complaint herein is based solely and exclusively on service of alcohol to contribute to intoxication, a situation it maintains is specifically excluded by the above-quoted exclusion, a so-called "dram-shop" liability exclusion. ¹ There can be no dispute that under the terms of this policy actions based upon "dram-shop" liability are not covered. Plaintiff argues that in any event the complaint was amended at the trial of the tort action to explicitly charge nondram-shop negligence. This argument need not be considered since the issue herein should appropriately be resolved on the face of the original tort complaint as it was filed in the count against Mt. Hope Inn without reference to the amendment at trial. The insurer's duty to defend must be determined in the first instance by comparing the allegations of the complaint against the provisions of the insurance policy. If there are allegations in the complaint which could, if proved, come within the coverage provided whether the insured is ultimately liable or not, and even if such allegations be unfounded or fraudulent, there is a duty to defend. Danek v. Hommer, 28 N.J.Super. 68, 100 A.2d 198 (App.Div.1953). This duty remains even though ambiguity may result based upon other language charged in other parts of the complaint or other allegations are made which do not come within the provisions of the policy. Courts are bound to protect the insured to the full extent any fair interpretation will allow. Kievit v. Loyal Protective Life Ins. Co., etc.,34 N.J. 475, 170 A.2d 22 (1961); Mazzilli v. Accident & Cas. Ins. Co. of Winterthur, 35 N.J. 1, 7, 170 A.2d 800 (1961).

Dismissal by the trial judge of Radwanski's suit against Mt. Hope for lack of proof at the end of plaintiff's case is not relevant to the issues herein. Ohio Cas. Ins. Co. v. Flanagin, 44 N.J. 504, 210 A.2d 221 (1965). The duty to defend springs from the charges stated in the complaint, not from the ultimate result. Deodato v. Hartford Ins. Co., 143 N.J.Super. 396, 401, 363 A.2d 361 (Law Div.1976).

Travelers acknowledges that the applicable law is set forth in Appleman, Insurance Law and Practice, § 4683, as quoted with approval in Danek v. Hommer, 28 N.J.Super. 68, 76, 100 A.2d 198, 202 (App.Div.1953) as follows:

An insurer's duty to defend an action against the insured is measured by the allegations in the plaintiff's pleadings, and if such pleadings state facts bringing the injury within the coverage of the policy, the insurer must defend, irrespective of the insured's ultimate liability to the plaintiff.

Nevertheless, Travelers insists that even if Radwanski had been able to prove all of the allegations set forth in his complaint against the tavern and obtained a judgment based on those allegations, the action would still have been outside the scope of coverage of his particular policy of insurance because of the "dram-shop" liability exclusion.

This court disagrees. Paragraph two of the count against the insured tavern does allege negligence based solely on alleged service of alcohol to Trincanello while he was intoxicated, and is, as Travelers argues, barred by the "dram-shop" liability exclusion. Paragraph three, however, a separate and distinct allegation, charges only that the tavern and its employees knew or should have known that Trincanello was intoxicated and failed to protect their patron, Radwanski, from the intoxicated Trincanello's assault. There is no allegation in this paragraph that the insured served the assailant with intoxicants merely that he was intoxicated and because of the insured's...