Property-Owners Ins. Co. v. Virk Boyz Liquor Stores, LLC

• Decision Date: 09 November 2016
• Docket Number: NO. 1:15–cv–87,1:15–cv–87
• Parties: PROPERTY–OWNERS INSURANCE COMPANY, Plaintiff, v. VIRK BOYZ LIQUOR STORES, LLC d/b/a KPC Liquor Stores, Inc., KPC Liquor Stores, Inc. d/b/a Stein Tavern, Terry J. Woods, and Dwayne E. Russell, Defendants.
• Court: U.S. District Court — Northern District of Indiana

219 F.Supp.3d 868

PROPERTY–OWNERS INSURANCE COMPANY, Plaintiff,

v.VIRK BOYZ LIQUOR STORES, LLC d/b/a KPC Liquor Stores, Inc., KPC Liquor Stores, Inc. d/b/a Stein Tavern, Terry J. Woods, and Dwayne E. Russell, Defendants.

NO. 1:15–cv–87

United States District Court, N.D. Indiana, Fort Wayne Division.

Signed November 9, 2016

Margaret A. Molloy, David L. Taylor, Taylor Law Firm PC, Indianapolis, IN, for Plaintiff.

Larry L. Barnard, Carson Boxberger LLP, Fort Wayne, IN, Jon C. Abernathy, Goodin Abernathy LLP, Indianapolis, IN, for Defendants.

OPINION AND ORDER

PHILIP P. SIMON, CHIEF JUDGE

This is a declaratory judgment action in which Property–Owners Insurance Company seeks a declaration that it has no duty to defend or indemnify its client, Virk Boyz Liquor Store, the owner of a place called Stein Tavern. Virk Boyz was sued in state court for damages arising out of a bar fight that occurred at Stein Tavern. Property–Owners seeks summary judgment on both the issue of whether it has a duty to defend Virk Boyz and also a duty to indemnify it. [DE 26.] But because there are disputed questions of fact, summary judgment is denied on the duty to defend issue, and because the issue of indemnity is not ripe, that portion of this action is dismissed without prejudice.

Factual Background

Terry Woods was a patron at Stein Tavern on December 28, 2013, and admits that he drank to intoxication. Woods was involved in an altercation at the bar that night and was seriously injured as a result. Approximately eight months later, Woods filed a case against the bar owner (the defendant in our case) in state court and alleged four separate causes of action. Count I is a negligence claim based on a failure to intervene theory. In particular, Woods claims that he was assaulted by another customer after he had requested assistance in fending off an impending attack. [DE 10–2 ¶ 5.] Woods says in Count I that Dwayne Russell, the Stein Tavern bartender, failed to protect him and negligently failed to intervene to stop the assault. [Id. ¶ 7.] Count II states a claim for negligently hiring Russell. Count III states a claim for negligent failure to train Russell. Finally, Count IV is a dram-shop claim. In it Woods alleges that Stein Tavern furnished alcoholic beverages to him when he "was visibly intoxicated and was served additional alcoholic beverage to a state of further intoxication" and the intoxication "was an actual and proximate cause of the incident and serious and permanent injuries to Plaintiff." [Id. ¶¶ 24, 26.] Woods was seriously injured during the bar fight and suffered permanent partial paralysis.

While not included in the allegations in the underlying complaint, Property–Owners sets forth additional facts in its statement of material facts in support of this motion. This is where I first learned that the bartender, Russell, was actually involved in the altercation. Property–Owners tells me that Woods "was injured after he was struck several times with a pool cue across his upper back and neck, punched in the face with a closed fist and ‘body-slammed’ to the floor by Dwayne Russell" [DE 26–1 at ¶ 3] and that Russell pled guilty to one count of aggravated battery and one count of battery [Id. at ¶ 4]. Property–Owners also submitted a video of the incident which I have reviewed. [DE 26–7.]

Ultimately, Virk Boyz demanded that Property–Owners defend and indemnify it in the underlying lawsuit, and Property–Owners agreed to defend but only under a reservation of rights. Property–Owners now asks me to find that there is no coverage under the insurance policy for the underlying lawsuit, and also that there is no duty to defend Virk Boyz as well.

The operative Policy of Commercial General Liability Insurance issued by Property–Owners contains the following exclusion:

c. Liquor Liability

"Bodily injury" or "property damage" for which any insured may be held liable for 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.

[DE 10–5.]

Additionally, the Policy provides the insurance applies to "bodily injury" and "property damage" only if the "bodily injury" or "property damage" is caused by an "occurrence." [Id. ] An "occurrence" is defined by the Policy as an "accident that results in bodily injury or property damage." [Id. ] There is also an expected or intended bodily injury exclusion, providing that the insurance does not apply to " ‘bodily injury’ or ‘property damage’ expected or intended from the standpoint of the insured." [Id. ] The Policy also contains a "separation of insureds" provision stating the Policy applies "[s]eparately to each insured against whom claim is made or ‘suit’ is brought." [Id. ]

Property–Owners has four arguments in support of its position that there is no duty to defend or indemnify Stein Tavern under the insurance policy: (1) the liquor liability exclusion bars coverage for all of the claims brought by Woods; (2) the claims for negligent hiring and training do not constitute an "occurrence" under the Policy; (3) the injury to Woods was intentional from the standpoint of Stein Tavern and Russell and thus excluded under the Policy; and (4) the insured never notified Property–Owners of the loss or incident. [DE 27 at 2.] I'll take up each of these in turn below.

Discussion

The parties agree that the substantive law applicable to this case is the law of the State of Indiana. Property–Owners has been providing a defense in the underlying suit under a reservation of rights. And under Indiana law, an insurer can "clarify its obligation by means of a declaratory judgment action," like this one. Liberty Mut. Ins. Co. v. Metzler , 586 N.E.2d 897, 902 (Ind. Ct. App. 1992).

Let's start with some basics. The interpretation of an insurance policy, like other contracts, is typically a question of law that I can resolve on summary judgment. Bosecker v. Westfield Ins. Co. , 724 N.E.2d 241, 243 (Ind. 2000). When interpreting an insurance policy, my goal is to ascertain and enforce the parties' intent as reflected in the insurance contract. Buckeye State Mut. Ins. Co. v. Carfield , 914 N.E.2d 315, 318 (Ind. Ct. App. 2009). If the policy language is clear and unambiguous, it should be given its plain and ordinary meaning. Am. States Ins. Co. v. Adair Indus., Inc. , 576 N.E.2d 1272, 1273 (Ind. Ct. App. 1991). However, ambiguous terms in the contract are to be construed against the insurer, especially where the policy excludes coverage. Cincinnati Ins. Co. v. Flanders Elec. Motor Serv., Inc. , 40 F.3d 146, 151 (7th Cir. 1994).

Insurance policies are adhesion contracts. They are drafted by insurance companies and are basically a "take it or leave it" deal. It is for this reason that any exclusions or limitations in an insurance policy must be plainly expressed, and any doubt or ambiguity in the policy must be read in favor of the insured. Am. Family Life Assurance Co. v. Russell , 700 N.E.2d 1174, 1177 (Ind. Ct. App. 1998). "The exclusionary clause must clearly and unmistakably bring within its scope the particular act or omission that will bring the exclusion into play, and any doubts to the coverage under the policy shall be construed against the insurer to further the policy's basic purpose of indemnity." Id. An insurer bears the burden of proving that an exclusion applies. PSI Energy, Inc. v. Home Ins. Co. , 801 N.E.2d 705, 725 (Ind. Ct. App. 2004).

An insurance company's duty to defend is broader than its duty to indemnify. Seymour Mfg. Co., Inc. v. Commercial Union Ins. Co., 665 N.E.2d 891, 892 (Ind. 1996). An insurer is obligated to defend its insured against suits alleging facts that might fall within the coverage of the policy. Fed. Ins. Co. v. Stroh Brewing Co. , 127 F.3d 563, 566 (7th Cir. 1997). "[T]here is essentially only one standard—that the allegations of the complaint, including the facts alleged, give rise to a duty to defend whenever, if proved true, coverage would attach." Id. Only if there is no possible factual or legal basis on which the insurer might be obligated to indemnify will the insurer be excused from defending its insured. Lee R. Russ, 14 COUCH ON INSURANCE § 200:12 (3d ed. 2007) ; see also Ticor Title Ins. Co. of Cal. v. FFCA/IIP 1988 Prop. Co. , 898 F.Supp. 633, 638–39 (N.D. Ind. 1995) (if there is even a possibility of coverage, the insurer is obligated to defend).

The first place to look when trying to determine the insurer's duty to defend is the allegations contained within the complaint and from those facts known or ascertainable by the insurer after reasonable investigation. Knight v. Ind. Ins. Co. , 871 N.E.2d 357, 362 (Ind. Ct. App. 2007) ; Liberty Mut. Ins. Co. v. OSI Indus., Inc. , 831 N.E.2d 192, 198 (Ind. Ct. App. 2005). It used to be under Indiana law that the duty to defend was "determined solely by the nature of the complaint." Transamerica Ins. Serv. v. Kopko , 570 N.E.2d 1283, 1285 (Ind. 1991). However, several Indiana appellate decisions have more recently declined to follow Kopko and found that "in evaluating the factual basis of a claim and the insurer's concomitant duty to defend, this court may properly consider the evidentiary materials offered by the parties to show coverage." Wayne Twp. Bd. of Sch. Comm'rs v. Ind. Ins. Co. , 650 N.E.2d 1205, 1208 (Ind. Ct. App. 1995) (citing Trisler v. Ind. Ins. Co. , 575 N.E.2d 1021, 1023 (Ind. Ct. App. 1991) ). This point was proven when the Indiana Supreme Court considered extrinsic, designated evidence when analyzing an insurer's duty to defend. See Auto–Owners Ins. Co. v. Harvey , 842 N.E.2d 1279, 1291 (Ind. 2006). As such, I have considered the relevant designated...