Summary
finding coverage not illusory where an exclusion did not "exclude coverage for virtually all liability"
Summary of this case from In re Generali COVID-19 Travel Ins. Litig.Opinion
Case No. 19-00654-CV-W-GAF
03-19-2020
ENDURANCE AMERICAN SPECIALTY INSURANCE COMPANY, Plaintiff, v. Jerry BROWN, et al., Defendants.
William Clayton Crawford, Grant D. Henderson, Foland Wickens Roper Hofer & Crawford, Kansas City MO, for Plaintiff. Thomas G. Morrissey, The Morrissey Law Firm, PC, Springfield MO, Stephen Gilbert Sanders, Sanders.Law, Kansas City MO, for Defendants.
William Clayton Crawford, Grant D. Henderson, Foland Wickens Roper Hofer & Crawford, Kansas City MO, for Plaintiff.
Thomas G. Morrissey, The Morrissey Law Firm, PC, Springfield MO, Stephen Gilbert Sanders, Sanders.Law, Kansas City MO, for Defendants.
ORDER
GARY A. FENNER, JUDGE
Now before the Court is Plaintiff Endurance American Specialty Insurance Company's ("Plaintiff" or "Endurance") Motion for Partial Judgment on the Pleadings, specifically seeking judgment on the pleadings with respect to Count II of its Complaint. (Doc. # 22). Defendants Jerry Brown ("Brown") and Lake Rat, LLC d/b/a Captain's Sports Lounge ("Captain's") oppose. (Docs. ## 25, 26). Neither Defendant Keith Dickey ("Keith") nor Defendant David D. Dickey ("David") filed a response to Plaintiff's Motion. (See Docket Sheet). For the following reasons, Plaintiff's Motion is GRANTED.
DISCUSSION
I. BACKGROUND
On July 25, 2018, Brown initiated the underlying lawsuit against Keith, David, and Captain's (the "underlying defendants") in the Circuit Court of Jackson County, Missouri, Case No. 1816-CV18959 (the "underlying lawsuit"). (Doc. # 1-2). Brown alleged Captain's knowingly served Keith several intoxicating liquors when he was visibly intoxicated on August 10, 2017. (Id. at ¶ 8). Later that evening, Keith operated a vehicle owned by David while intoxicated and struck the vehicle operated by Brown, resulting in injuries to Brown. (Id. at ¶¶ 10-15). In his Petition, Brown sought actual and punitive damages from Captain's for furnishing intoxicating liquor or alcohol in violation of Missouri Revised Statute § 537.053. (Id. at ¶¶ 33-39). On August 21, 2019, Endurance filed its Complaint in this Court, seeking a judgment declaring that it has no duty to defend or indemnify or provide liability coverage to the underlying defendants for the claims against them in the underlying lawsuit. (Doc. # 1). Count I of the Complaint addresses Brown's claims in the underlying lawsuit against Keith and David. (Doc. # 1, ¶¶ 30-48). Count II is directed at the claims against Captain's. (Id. at ¶¶ 49-59). Count III is directed at the claims for punitive damages against all underlying defendants. (Id. at ¶¶ 60-65).
The Complaint summarizes some of allegations in the underlying lawsuit as follows:
17. The Petition in the underlying lawsuit alleges that on the evening of August 10, 2017 in Jackson County, Missouri, Defendant Brown (underlying plaintiff) was operating a vehicle that collided with a vehicle driven by Defendant Keith Dickey which accident resulted in Brown sustaining personal injuries because of bodily injury.
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20. The Petition alleges Defendant Captain's is liable under § 537.053 R.S.Mo., the Missouri dram shop statute. Specifically, the Petition alleges Captain's furnished intoxicating liquor to Defendant Keith Dickey at such time that he was already visibly intoxicated.
21. The Petition further alleges that Defendant Captain's, through its agents, furnished intoxicating liquor to Defendant Keith Dickey despite knowledge or a reasonable belief that Keith Dickey would depart in a motor vehicle.
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52. The Petition in the underlying lawsuit alleges Captain's is liable for bodily injury, personal injury or property damage allegedly suffered by Defendant Brown by reason of its alleged conduct in the furnishing of alcoholic beverages to a Defendant Keith Dickey while Mr. Dickey was under the influence of alcohol.
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54. The Petition in the underlying lawsuit alleges Captain's is liable for bodily injury, personal injury or property damage allegedly suffered by Defendant Brown by reason of its alleged violation of the Missouri dram shop statute. § 537.053 R.S.Mo.
(Id. at ¶¶ 17, 20-21, 52, 54). In their respective answers, both Brown and Captain's admit paragraphs 17, 20, 21, 52, and 54 of the Complaint. (Doc. # 8, ¶¶ 17, 20-21, 52, 54; Doc. # 10, ¶¶ 17, 20-21, 52, 54). Additionally, attached to Endurance's Complaint is a copy of Insurance Policy Number CBP20001698500 issued to Captain's by Endurance (the "Policy"). (Doc. # 1-3). The Complaint quotes the Liquor Liability Exclusion endorsement (the "Endorsement") of the Policy, which contains the following language:
Liquor Liability Exclusion
THIS ENDORSEMENT CHANGES THE POLICY. PLEASE READ IT CAREFULLY.
This endorsement modifies insurance provided under the following:
COMMERCIAL GENERAL LIABILITY COVERAGE PART
In consideration of the premium charged, it is agreed that this policy does not apply to bodily injury, personal injury or property damage for which the insured or his indemnitee 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 influence of alcohol; or
(3) Any statute, ordinance or regulation relating to the sale, gift, distribution or use of alcoholic beverages.
This endorsement does not change any other provision of the Policy.
(Doc. # 1, ¶ 27; Doc. # 1-3, p. 52). Brown and Captain's admit this allegation. (Doc. # 8, ¶ 27; Doc. # 10, ¶ 27). The Policy also includes the following provision (the "Coverage Exclusion"):
SECTION I – COVERAGES
COVERAGE A BODILY INJURY AND PROPERTY DAMAGE LIABILITY
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2. Exclusions
This insurance does not apply to:
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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 only if you are in the business of manufacturing, distributing, selling, serving or furnishing alcoholic beverages.
(Doc. # 1-3, pp. 18-19). At the beginning of Section I, the Policy state that "words and phrases that appear in quotation marks have special meaning." (Id. at p. 18). The Policy later defines "bodily injury" as "bodily injury, sickness or disease sustained by a person, including death resulting from any of these at any time." (Id. at p. 30).
Both Brown and Captain's assert identical affirmative defenses concerning ambiguity and invalidity as follows:
FIFTH DEFENSE
The coverage exclusions of the commercial general liability insurance policy described in Plaintiff's Complaint, when construed with other provisions contained in the policy, are ambiguous, and pursuant to Missouri law, these provisions must be construed against Plaintiff and in favor of coverage.
SIXTH DEFENSE
The coverage exclusions of the commercial general liability insurance policy described in Plaintiff's Complaint, when construed with other provisions contained in the policy, make coverage under the policy illusory for Defendant [Brown or Captain's], and pursuant to Missouri law, these provisions are invalid and unenforceable or must be construed against Plaintiff and in favor of coverage.
(Doc. # 8, p. 10; Doc. # 10, pp. 7-8).
II. LEGAL STANDARD
After the pleadings have closed, any party may move to have the Court enter judgment on the pleadings. FED. R. CIV. P. 12(c). Generally, a Rule 12(c) motion for judgment on the pleadings is reviewed under the same standard as a Rule 12(b)(6) motion to dismiss. Ginsburg v. InBev NV/SA , 623 F.3d 1229, 1233 n.3 (8th Cir. 2010). "A motion for judgment on the pleadings should be granted when, accepting all facts pled by the nonmoving party as true and drawing all reasonable inferences from the facts in favor of the nonmoving party, the movant has clearly established that no material issue of fact remains and that the movant is entitled to judgment as a matter of law." Schnuck Mkts., Inc. v. First Data Merch. Servs. Corp. , 852 F.3d 732, 737 (8th Cir. 2017). III. ANALYSIS
Plaintiff argues it is entitled to judgment on the pleadings in its favor on Count II because the pleadings and attachments thereto show Plaintiff has no duty to defend Captain's in the underlying lawsuit. (Doc. # 23). Brown argues an ambiguity in the Policy requires the Court to consider evidence beyond the pleadings, making judgment on the pleadings improper. (Doc. # 25). Captain's argues material facts are in dispute because ambiguity within the Policy exists and that the Endorsement and the Coverage Exclusion, construed together, render almost all coverage under the Policy illusory. (Doc. # 26).
A. Is the Policy ambiguous?
Both Brown and Captain's argue that, because they have pleaded an affirmative defense of ambiguity, the Court must consider evidence beyond the pleadings, making judgment on the pleadings improper. (Doc. # 25, p. 2; Doc. # 26, p. 3). However, under Missouri law, "whether an insurance policy is ambiguous is a question of law for the court's determination." Nat'l Union Fire Ins. Co. of Pittsburgh, Pa. v. Maune , 277 S.W.3d 754, 757 (Mo. Ct. App. 2009) (citing Todd v. Mo. United Sch. Ins. Council , 223 S.W.3d 156, 160 (Mo. 2007) (en banc)). A disagreement between the parties as to the interpretation of an insurance policy does not necessarily create ambiguity. Shelter Mut. Ins. Co. v. Ballew , 203 S.W.3d 789, 794 (Mo. Ct. App. 2006) (citing J.E. Hathman, Inc. v. Sigma Alpha Epsilon Club , 491 S.W.2d 261, 264 (Mo. 1973) (en banc)). Thus, the mere fact that Brown and Captain's pleaded affirmative defenses of an ambiguity is not dispositive.
Brown additionally argues in a conclusory fashion that the Policy is ambiguous because the Endorsement and the Coverage Exclusion are duplicitous and the Coverage Exclusion uses quotation marks around the words "bodily injury" while the Endorsement does not. (Doc. # 25, pp. 3-5). To determine if an insurance policy's provision is ambiguous, a court must read the policy as a whole and "consider the language in light of the meaning that would normally be understood by the layperson who bought and paid for the policy." Maune , 277 S.W.3d at 757-58. However, a court may not "unreasonably distort the language of a policy or exercise inventive powers for the purpose of creating an ambiguity when none exists." Todd , 223 S.W.3d at 163. An ambiguity arises if the policy is reasonably open to different constructions due to duplicity, indistinctness, or uncertainty in the meaning of the words used. John Patty, D.O., LLC v. Mo. Prof'ls Mut. Physicians Prof'l Indem. Ass'n , 572 S.W.3d 581, 589 (Mo. Ct. App. 2019). "When a policy is found to be ambiguous, it will be construed against the insurer." Ballew , 203 S.W.3d at 794.
The Coverage Exclusion and the Endorsement are nearly identical; and it is true that the words "bodily injury" are surrounded by quotation marks in the Coverage Exclusion and but not so in the Endorsement. The Policy does state that "words and phrases that appear in quotation marks have special meaning" and that " ‘[b]odily injury’ means bodily injury, sickness or disease sustained by a person, including death resulting from any of these at any time." (Doc. # 1-3, pp. 18, 30). Importantly, the Policy's definition of the quoted phrase "bodily injury" includes the phrase of bodily injury without quotation marks, just like the Endorsement. (Id. at pp. 30, 52). As the court must "give words the meaning that would normally be understood by the average lay person," Ballew , 203 S.W.3d at 794 (quotation omitted), the definition of the unquoted phrase bodily injury in both the Endorsement (Doc. # 1-3, p. 52) and in the definition of the quoted phrase "bodily injury" (Id. at p. 30) are identical. Thus, both the Coverage Exclusion and the Endorsement clearly include the layperson's normal understanding of bodily injury and the Policy is not reasonably open to different interpretations despite this duplicity. To the extent ambiguity exists in the Policy, it only exists regarding whether "sickness" and/or "disease" is covered under the Policy.
Plaintiff pleaded, and Brown and Captain's admitted, that the underlying lawsuit alleged Brown sustained personal injuries because of bodily injury. (Doc. # 1, ¶ 17; Doc. # 8, ¶ 17; Doc. # 10, ¶ 17). Accordingly, any ambiguity regarding the coverage of "sickness" and/or "disease" does not affect a determination of whether Plaintiff has a duty to defend the underlying lawsuit because Brown has not sought damages for a "sickness" or "disease." Therefore, the Policy is not ambiguous as applied to this case.
Consequently, extrinsic evidence cannot be used to aide in the interpretation of the Policy under the parol evidence rule. See
B. Is the Policy coverage illusory?
Citing to non-binding authority, Captain's argues the Endorsement and Coverage Exclusion, construed together, render almost all coverage under the Policy illusory or require the Court to hold an evidentiary hearing to determine if coverage was illusory. (Doc. # 26, pp. 5-8). The Court does not agree.
In the first case cited by Captain's, the Southern District of Indiana determined an endorsement entitled "absolute liquor" rendered coverage under the policy illusory. Monticello Insurance Company v. Mike's Speedway Lounge , 949 F. Supp. 694, 702 (S.D. Ind. 1996). The absolute liquor endorsement provided that "[i]n 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." Id. at 696. The court stated that this endorsement applied to virtually all liability arising from any activity of the insured's business because all of the insured's activities would be "in connection with" the selling of alcohol. Id. at 700-01.
The present case is entirely distinguishable because Captain's does not point to any language in the Policy that excludes coverage for virtually all liability arising from Captain's business. Based on the plain language of the Policy, liability coverage is provided for a wide variety of risks such as premises liability, products liability, and property damage. That the Endorsement and the Coverage Exclusion narrow Captain's coverage does not render the Policy illusory. Indeed, the Monticello court held that an exclusion nearly identical to the Endorsement and the Coverage Exclusion was enforceable. Monticello , 949 F. Supp. at 703.
The second case cited also held that an exclusion mirroring the Endorsement and the Coverage Exclusion did not render coverage illusory. Mitzan v. W. Heritage Ins. Co. , 623 F. Supp. 2d 993, 998 (E.D. Mo. 2009). Captain's argues that the Mitzan holding depended on the fact that the court heard evidence that the insured made a conscious decision not to purchase additional coverage. (Doc. # 26, p. 7). A reading of the case, however, shows that is not an accurate description of the holding. The Eastern District noted liquor liability exclusions are standard in the insurance industry and that Missouri courts have upheld the applicability of such exclusions. Mitzan , 623 F. Supp. 2d at 997 (citing Auto Owners (Mut.) Ins. Co. v. Sugar Creek Mem'l Post No. 3976 , 123 S.W.3d 183 (Mo. Ct. App. 2003) ). The court then analyzed Monticello , finding its holding inapplicable to the circumstances in Mitzan , and determining "there [was] no basis for refusing to apply the unambiguous terms of the liquor liability exclusion." Id. at 998. The court then referred to undisputed evidence in dicta, but only to provide an alternative basis for applying the liquor liability exclusion. Id. ("Furthermore, based on Mary Hatcher's testimony that she declined to purchase additional coverage, there is no dispute of fact with respect to whether the insured reasonably expected that she had bargained for and received liquor liability coverage."). Captain's arguments that the Policy's coverage is illusory are without merit.
C. Does Plaintiff have a duty to defend Captain's in the underlying lawsuit?
An insurer's duty to defend is broader than its duty to indemnify. Allen v. Cont'l W. Ins. Co. , 436 S.W.3d 548, 552-53 (Mo. 2014) (en banc). A duty to defend arises if the allegations in the petition and/or the facts the insurer knew or were reasonably apparent to the insurer at the outset of the case are potentially covered by the insurance policy. Id. at 553. "If there is no potential for coverage based on those facts, then the insurer has no duty to defend." Id. "Where there is no duty to defend, there is no duty to indemnify." Trainwreck W. Inc. v. Burlington Ins. Co. , 235 S.W.3d 33, 44 (Mo. Ct. App. 2007) (quotation omitted).
When an insurer seeks to escape coverage based on an exclusion, the insurer bears the burden to establish the exclusion's applicability. Superior Equip. Co., Inc. v. Md. Cas. Co. , 986 S.W.2d 477, 482 (Mo. Ct. App. 1998). Where the pleadings shows on their face the exclusion's applicability, the insurer's burden is met. See, e.g., Ira E. Berry, Inc. v. Am. States Ins. Co. , 563 S.W.2d 514, 516 (Mo. Ct. App. 1978).
Here, the Policy excludes coverage for bodily injury for which Captain's "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 influence of alcohol; or (3) Any statute, ordinance or regulation relating to the sale, gift, distribution or use of alcoholic beverages." (Doc. # 1-3, pp. 19, 52). Both Brown and Captain's admit the underlying lawsuit is seeking damages for bodily injury and alleges that Captain's is liable by reason of (1) furnishing alcohol to Keith, i.e., causing or contributing to the intoxication of Keith; (2) furnishing alcohol to Keith while he was under the influence; and (3) Captain's violation of Missouri's dram shop statute, Mo. Rev. Stat. § 537.053. (Doc. # 1, ¶¶ 17, 52, 54; Doc. # 8, ¶¶ 17, 52, 54; Doc. # 10, ¶¶ 17, 52, 54). Consequently, Plaintiff has shown the exclusion applies based on the face of the pleadings. As such, Plaintiff is entitled to judgment on the pleadings on Count II of the Complaint.
CONCLUSION
No ambiguity exists regarding the exclusion of coverage for bodily injury for which Captain's "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 influence of alcohol; or (3) Any statute, ordinance or regulation relating to the sale, gift, distribution or use of alcoholic beverages." (Doc. # 1-3, pp. 19, 52). The Policy's coverage is not illusory. Based on the face of the pleadings, Plaintiff is entitled to judgment in its favor on Count II. For these reasons and the reasons set forth above, Plaintiff's Motion for Partial Judgment on the Pleadings is GRANTED.
IT IS SO ORDERED.
Emerald Pointe, L.L.C. v. Jonak , 202 S.W.3d 652, 661-62 (Mo. Ct. App. 2006).