United States Liability Ins. Co. v. Harbor Club, Inc.
| Decision Date | 08 May 2008 |
| Docket Number | 063938BLS2 |
| Parties | United States Liability Insurance Company v. Harbor Club, Inc. et al. |
| Court | Massachusetts Superior Court |
As-is Docket Number: 06-3938-BLS2
Judge (with first initial, no space for Sullivan, Dorsey, and Walsh): Fabricant, Judith, J.
This action presents a dispute about insurance coverage under a designated premises limitation in a commercial general liability policy ("CGL") issued by United States Liability Insurance Company ("USLIC") to Harbor Club, Inc. & East Bay Management d/b/a Trader Ed's ("Trader Ed's"). The parties in interest before the Court are USLIC and National Union Fire Insurance Company of Pittsburgh, Pa., which covered the claim under an umbrella policy after USLIC denied coverage. Before the Court are cross motions for summary judgment. For the reasons that will be explained, USLIC's motion will be allowed, and National Union's will be denied.
The record before the Court establishes the following facts as undisputed for purposes of the present motions.[1] Trader Ed's operates a restaurant at 21 Arlington Street in Hyannis. USLIC issued a CGL policy to Trader Ed's for the year May 21, 2005 to May 21, 2006. In its application for the policy, Trader Ed's responded to questions regarding its classification and exposure by indicating that its business is as a restaurant, that it does not have any exposure with respect to any "athletic events," that it does not sponsor any "sporting or social events," and that it does not "provide any Off-Premises Catering Services." The declarations page of the policy identifies the only premises owned, rented or occupied by the insured as 21 Arlington Street, Hyannis, and describes the "premium classification" as "Restaurant - with sale of alcoholic beverages."
The policy covers liability, within specified limitations, for bodily injury damage caused by an "accident" that occurs on premises owned or rented by the insured or because of the insured's operations. Coverage is subject however, to a "Designated Premises or Project Endorsement." That endorsement appears on a separate page, which bears the heading, in large capital letters The endorsement states: A schedule appears on the same page, which lists no premises or project, but states: "If no entry appears above, information required to complete this endorsement will be shown in the Declarations as applicable to this Endorsement." As indicated supra, the declarations page identifies the premises as 21 Arlington Street, Hyannis.
On June 22, 2005, Bacardi U.S.A., a supplier to Trader Ed's, sponsored a Jimmy Buffet concert at the Tweeter Center in Mansfield. The concert was an annual event. Bacardi supplied tickets for various Trader Ed's personnel, along with alcohol for tailgate parties, advertising and various promotional items. John Shea, Trader Ed's owner, organized a group trip from Hyannis to the concert and a tailgate party. He rented a bus to transport people, and invited other Hyannis business owners to travel on the bus for a twenty-dollar fee, along with employees and customers of Trader Ed's. Trader Ed's supplied a gas grill, a frozen drink machine, food and drinks, equipment for the use of a disc jockey, and three employees (Shea, John Bearse, and Antonio Dias) to operate the grill. The purpose of Trader Ed's involvement, according to Shea's deposition testimony, was to promote its business and its employees' morale. John Bearse, Trader Ed's assistant manager, participated in planning and organizing the event, including supervising the transportation of the gas grill and other equipment and supplies from Trader Ed's premises in Hyannis to Mansfield, and supervising its operation at the event. His training, as well as that of Shea and Dias, had occurred at Trader Ed's premises in Hyannis.
The tailgate party ended badly. The Trader Ed's personnel had difficulty lighting the grill. Their efforts, which are alleged to have included Bearse pouring gasoline on the grill, resulted in an explosion, which injured Dias and Kimberly Mooney, a Hyannis business person who had traveled to the event on the Trader Ed's bus. Dias received workers' compensation benefits for his injuries, provided by Trader Ed's workers' compensation carrier, on the basis that he was injured in the course of his employment.
On January 11, 2006, Mooney filed suit in Norfolk Superior Court, naming Bacardi, Trader Ed's, Shea and Bearse. She alleged that her injuries arose from negligence of Trader Ed's and its employees in the conduct of the tailgate party and operation of the gas grill. Trader Ed's tendered the case to USLIC for defense. USLIC declined, relying on the designated premises endorsement, and filed this declaratory judgment action on September 20, 2006. Trader Ed's joined National Union, asserting that it was obligated to defend and indemnify under its umbrella policy. National Union assumed the defense of the Mooney case under a reservation of rights, and cross claimed in this action against USLIC, seeking a declaration that USLIC was obligated to defend and indemnify, and to reimburse National Union for its defense costs. While this case was pending, the Mooney case was settled, with National Union providing indemnification for Trader Ed's and its employees.
The question presented by the present motions is whether USLIC's policy covered Mooney's claims, or whether it excluded those claims under the designated premises endorsement. A secondary question, raised by National Union's motion, is whether, even if USLIC's policy did not cover Mooney's claims, USLIC was nevertheless obligated to provide a defense, and is therefore liable to National Union for its defense costs.
The interpretation of an insurance policy is a question of law for the court, see Cody v. Connecticut Gen. Life Ins. Co. 387 Mass. 142, 146 (1982), and where the terms of the policy are unambiguous, its interpretation is appropriate for summary judgment. See Sullivan v. Southland Life Ins. Co., 67 Mass.App.Ct. 439, 442 (2006). Where the provisions of an insurance policy are plainly expressed, the policy must be enforced in accordance with its terms, see Cody, 387 Mass. at 146, and interpreted in a manner consistent with what an objectively reasonable insured would expect to be covered. See McGregor v. Allamerica Ins. Co., 449 Mass. 400, 402 (2007); City Fuel Corp. v. National Ins. Co. of Hartford, 446 Mass. 638, 642-43 (2006). If, however, "the contract is ambiguous, doubts as to the meaning of the words must be resolved against the insurance company that employed them and in favor of the insured." August A. Busch & Co. of Mass. v. Liberty Mut. Ins. Co., 339 Mass. 239 243 (1959). "A term is ambiguous only if it is susceptible of more than one meaning and reasonably intelligent persons would differ as to which meaning is the proper one." County of Barnstable v. American Fin. Corp., 51 Mass.App.Ct. 213, 215 (2001). An ambiguity is not created, however, simply because there is a controversy between the parties as to the interpretation of the policy provisions. See Lumbermens Mut. Cas. Co. v. Offices Unlimited, Inc., 419 Mass. 462, 466 (1995).
The issue of coverage in this case depends on application of the designated premises endorsement. Under that endorsement, the USLIC policy provides coverage only if Mooney's injury arose out of "[t]he ownership, maintenance or use" of Trader Ed's premises at 21 Arlington Street in Hyannis, or of "operations necessary or incidental to those premises."[2] The parties have identified no Massachusetts case law construing designated premises endorsements.[3] A small number of cases from other jurisdictions apply such provisions to varying factual scenarios, reaching varying results. The cases that seem most pertinent are four: Harkless v. Sylvester, 961 So.2d 535 (La.App. 2007); Union American Ins. Co. v. Haitian Refugee Ctr., 858 So.2d 1076 (Fla. 2003); On Air Entertainment Corp. v. National Indemnity Co., 210 F.3d 146 (3rd Cir. 2000); and American Guarantee and Liab. Ins. Co. v. 1906 Co., 129 F.3d 802 (5th Cir. 1997).
In Harkless, 961 So.2d at 536, the insured, who operated a jazz lounge, purchased an adjacent property with an abandoned dilapidated building. It was alleged that he failed to secure the building adequately, leaving it available to vagrants, who started a fire, which damaged a neighboring building. Id. Although there was evidence that the insured had bought the adjacent property "in furtherance of his business," a divided panel of the Louisiana Court of Appeal held that the designated premises endorsement precluded coverage because there was no "causal connection" between the occurrence and the designated premises.[4] Id. at 537.
In Union American Ins. Co., 858 So.2d at 1077, the insured organized a rally about a mile from its headquarters. A shooting death occurred at the rally, allegedly as a result of negligence by the insured in providing for security. Id. The Florida Appeals Court held that the event was excluded under the designated premises endorsement because it occurred "at a location far removed from, and in a manner unrelated to, the Center described in the policy." Id. The Court observed that the designated premises endorsement "effectively converted the [general commercial liability] policy into the...
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