Opinion
NOT TO BE PUBLISHED
APPEAL from a judgment of the Superior Court of San Diego County No. GIC864007, Joan M. Lewis, Judge.
IRION, J.
Under the terms of an insurance policy, Columbia Casualty Company (Columbia Casualty) is obligated to defend and indemnify Martini Ranch San Diego, LLC (Martini Ranch) whenever Martini Ranch is faced with potential liability that "arises out of the selling, serving or furnishing of any alcoholic beverage." After Columbia Casualty denied coverage under the policy for two lawsuits filed against Martini Ranch, Martini Ranch sued Columbia Casualty in superior court. The trial court dismissed the lawsuit, granting Columbia Casualty's summary judgment motion on the ground that the insurance policy had no application to the underlying lawsuits against Martini Ranch.
Martini Ranch appeals, contending that the trial court's ruling rests on an overly narrow interpretation of the phrase "arises out of" and consequently must be reversed. As discussed below, we disagree. The underlying lawsuits alleged that Martini Ranch's security personnel acted improperly (assaulting and slandering patrons), and Martini Ranch was negligent in its training, supervision and retention of those employees. As these allegations created no potential that Martini Ranch would be held liable based on its "selling, serving or furnishing of any alcoholic beverage," Columbia Casualty's policy did not apply, and the trial court properly granted Columbia Casualty's motion for summary judgment.
PROCEDURAL HISTORY
A. Noland/Kinchin Lawsuit
In February 2006, Christopher V. Noland and Harry E. Kinchin filed suit against Martini Ranch, a bar and nightclub in downtown San Diego, alleging causes of action for: 1) negligence; 2) assault; 3) battery; 4) intentional infliction of emotional distress; 5) false imprisonment; 6) slander; 7) violation of the Unruh Civil Rights Act (Civ. Code, § 51 et seq.); and 8) violation of the Tom Bane Civil Rights Act (Civ. Code, § 52.1).
According to the complaint, Noland and Kinchin, both African-American males, patronized Martini Ranch on July 16, 2005, while in the company of two Caucasian female friends. While they were dancing, a Caucasian patron of the club threatened Noland and Kinchin with violence. After Noland and Kinchin returned to their tables, a Martini Ranch employee approached them and instructed them to leave. As they were escorted out of the club, both Noland and Kinchin were allegedly shoved, grabbed and hit by club bouncers and placed in handcuffs. The complaint alleges that the Martini Ranch bouncers then made false allegations against them to police, and Noland and Kinchin were arrested and taken to jail. All charges were eventually dropped.
Martini Ranch tendered the Noland/Kinchin complaint to Columbia Casualty seeking coverage for any losses it might incur in the lawsuit and a defense of the claims, based on its insurance policy, titled the "Liquor Liability Policy." Columbia Casualty rejected Martini Ranch's request, explaining in its denial letter that "there is no coverage under this Liquor Liability [P]olicy for the allegations set forth in the complaint" because "[n]one of the allegations . . . pertain to the sale, service or furnishing of alcohol . . . ." The letter adds, "Because there is no coverage under the policy, Columbia Casualty Company will not provide either a defense or indemnification in this lawsuit."
B. Yerid Lawsuit
On December 22, 2005, Steven Yerid filed suit against Martini Ranch, alleging causes of action for: 1) general negligence; 2) premises liability; and 3) intentional tort — assault and battery. Yerid alleged that he was at Martini Ranch at approximately 1:45 a.m. on September 24, 2005, when he was told by a Martini Ranch bouncer to leave. As Yerid and his female companion got up to do so, and while Yerid's back was turned, the bouncer grabbed him and knocked him to the floor. Yerid was then (allegedly) pushed down the stairs toward an exit door, and thrown onto the ground outside the club, breaking his nose and suffering other injuries. The complaint alleged that the attack constituted "an intentional assault and battery," and that Martini Ranch was "negligent in hiring, supervising and retaining its employees" and was "vicariously liable for th[eir] acts."
Martini Ranch tendered the Yerid action to Columbia Casualty, seeking coverage under the Liquor Liability Policy, but was denied coverage or a defense because, according to Columbia Casualty, "[t]he complaint does not make any liquor liability related allegations."
C. Trial Court Proceedings
After receiving the letters denying coverage, Martini Ranch filed suit against Columbia Casualty, asserting causes of action for breach of insurance contract; breach of implied covenant of good faith and fair dealing; and declaratory relief. After answering the complaint, Columbia Casualty filed a motion for summary judgment on the grounds that the Liquor Liability Policy had no application to the Noland/Kinchin or Yerid lawsuits.
After a hearing on the motion, the trial court granted Columbia Casualty's motion. The court ruled:
"Although alcohol could have played a role in the incidents giving rise to the underlying action, this Court concludes that 'any liability for injury' by Martini Ranch would not have — in these actions — arisen out of the "selling, serving or furnishing of any alcoholic beverage . . . .' For this reason, the Court concludes that the Defendant has met its burden of demonstrating that there was no breach of contract or bad faith and that these causes of action lack merit. In opposing the motion Plaintiff has offered insufficient evidence to create a triable issue of fact. Accordingly, Defendant's motion for summary judgment is granted."
DISCUSSION
Martini Ranch contends that the trial court erred by interpreting the "arises out of" language in the insurance contract too narrowly. Martini Ranch argues that the narrow interpretation runs contrary to California case law, and effectively leaves Martini Ranch "with little or no coverage" under the Liquor Liability Policy. We disagree.
An insurance carrier has a duty to indemnify its insured for covered losses, as well as a broader duty to defend a lawsuit against its insured whenever "the underlying suit 'potentially seeks damages within the coverage of the policy' " or "when the policy is ambiguous and the insured would reasonably expect coverage based on the 'nature and kind of risk covered by the policy.' " (La Jolla Beach & Tennis Club, Inc. v. Industrial Indemnity Co. (1994) 9 Cal.4th 27, 38 (La Jolla Beach & Tennis Club).)
While the duty to defend is broad, it is "not without limits." (La Jolla Beach & Tennis Club, supra, 9 Cal.4th at p. 39.) " '[W]here there is no potential for coverage, there is no duty to defend.' " (Id. at p. 40.) Consequently, an "insurer may reject a tender of defense or withdraw from defending a claim once it is able to demonstrate, by reference to undisputed facts, that the claim cannot be covered." (Ringler Associates Inc. v. Maryland Casualty Co. (2000) 80 Cal.App.4th 1165, 1186-1187; Michaelian v. State Comp. Ins. Fund (1996) 50 Cal.App.4th 1093, 1106 ["the insured ' "may not speculate about unpled third party claims to manufacture coverage" ' [citation], and the insurer has no duty to defend where the potential for liability is ' "tenuous and farfetched" ' "; "[t]he ultimate question is whether the facts alleged 'fairly apprise' the insurer that the suit is upon a covered claim"].)
"When determining whether a particular policy provides a potential for coverage and a duty to defend, we are guided by the principle that interpretation of an insurance policy is a question of law." (Waller v. Truck Ins. Exchange, Inc. (1995) 11 Cal.4th 1, 18 (Waller); Lomes v. Hartford Financial Services Group, Inc. (2001) 88 Cal.App.4th 127, 132 ["Whether an insurance policy provides that potential for coverage and, thus, a duty to defend exists, is a question of law for the court to decide"].)
In the instant case, Columbia Casualty had no duty to defend or indemnify Martini Ranch for the underlying lawsuits because there was " 'no potential for coverage.' " (La Jolla Beach & Tennis Club, supra, 9 Cal.4th at p. 40.) The Liquor Liability Policy insured Martini Ranch solely "if liability for injury arises out of the selling, serving or furnishing of any alcoholic beverage." As neither the Yerid nor the Noland/Kinchin lawsuits created any possibility that liability would arise out of Martini Ranch's "selling, serving or furnishing of any alcoholic beverage," those lawsuits did not trigger Columbia Casualty's duties to defend or indemnify.
The contract states in pertinent part:
Emphasizing the broad interpretation generally given to the phrase "arising out of" in case law, Martini Ranch contends that coverage exists under the Liquor Liability Policy because there is evidence that both Yerid and Noland consumed alcohol during their patronage of Martini Ranch. (See, e.g., Medill v. Westport Ins. Corp. (2006) 143 Cal.App.4th 819, 829-830 [emphasizing broad interpretation of "arising out of" in interpreting exclusionary clause in insurance contract]; Troutt v. Colorado Western Ins. Co. (9th Cir. 2001) 246 F.3d 1150, 1160 (Troutt) [interpreting "arising out of" in insurance contract under Montana law].) While a broad interpretation of the phrase "arises out of" is indeed warranted under the case law, there remains some limit beyond which the phrase cannot be stretched. Even under the broadest interpretation of "arises out of," there still must be some connection, however tenuous, between the sale or furnishing of alcohol and Martini Ranch's potential liability. (Cf. State Farm Mut. Auto. Ins. Co. v. Partridge (1973) 10 Cal.3d 94, 97, 100 [holding that insurance policy that provided coverage for incidents " 'arising out of the use' of a motor vehicle," covered "injuries bearing almost any causal relation with the vehicle"].) In the instant case, there is none. (Compare Troutt, at pp. 1154-1155 [plaintiff in underlying lawsuit injured while chopping wood for Little Joe's Tavern, where work was undertaken "in return for a promise of free alcohol" and alcohol was served during wood chopping].)
According to Martini Ranch, Yerid consumed "several alcoholic beverages" while at the club, and Noland "consumed at least a shot of hard alcohol and a cocktail."
Martini Ranch relies heavily on the Ninth Circuit's decision in Troutt, supra, 246 F.3d 1150. Troutt, however, is distinguishable on numerous grounds: (i) it was decided under Montana law; (ii) it considered a set of facts where a tavern faced potential liability based in significant part on its provision of alcohol; and (iii) it did not decide the question of whether liability existed under the insurance policy, as that question had been decided in a separate state court proceeding. (Troutt, at pp. 1156-1163.) Consequently the case has little bearing on the issues in this appeal.
Given the allegations in the underlying lawsuits, any liability faced by Martini Ranch would arise out of the negligent training, supervision and retention of its employees as well as those employees' allegedly assaultive and slanderous behaviors. Such potential liability has nothing at all to do with the club's "selling, serving or furnishing of any alcoholic beverage." Indeed, the Yerid and the Noland/Kinchin lawsuits do not suggest or imply that Martini Ranch's provision of alcohol to the plaintiffs (or anyone else) was in any way improper and thus could potentially form the basis for liability.
We emphasize that our ruling does not rest on Columbia Casualty's contention in its briefs and at oral argument that due to California's grant of " 'sweeping civil immunity' to tavern owners for any claim by any person for injuries arising out of the consumption of alcohol," the Liquor Liability Policy covers only liability for injuries arising out of the service of alcohol to obviously intoxicated minors. (Cardinal v. Santee Pita, Inc. (1991) 234 Cal.App.3d 1676, 1683 ["By declaring the consumption of alcohol, and not the sale or furnishing of such, to be the proximate cause of injury inflicted by intoxicated persons, except for sales by licensed vendors to obviously intoxicated minors, the Legislature spoke loudly, and clearly it rejected the concept of preserving even limited liability for those selling or furnishing alcoholic beverages to anyone other than obviously intoxicated minors"]; Civ. Code, § 1714, subds. (b), (c); Bus. & Prof. Code, § 25602, subd. (b).) Our ruling here is required by and limited to the facts of this case, which establish that, given the claims in the underlying lawsuits, there was no potential for coverage under the Liquor Liability Policy. (Cf. People v. Alvarez (2002) 27 Cal.4th 1161, 1176 ["it is axiomatic that cases are not authority for propositions not considered"].)
Columbia Casualty's vehement assertion that its policy only covers claims for injuries arising from Martini Ranch's service of alcohol to obviously intoxicated minors formed a large part of the discussion at oral argument. We are skeptical of this contention and can conceive of numerous circumstances where a defense, if not coverage, would be due under the language of the policy despite California's limits on tavern owner liability. Consequently, we are not prepared to interpret the policy language in as sweeping a manner as Columbia Casualty asserts
Martini Ranch also contends that if we accept the trial court's reading of the Liquor Liability Policy, the coverage Martini Ranch purchased from Columbia Casualty is overpriced, considering its narrow scope. However, this argument is of little moment to this appeal. Even if we accept the assumption that Martini Ranch overpaid for the Liquor Liability Policy, that fact would not permit us to extend coverage beyond the literal terms of the policy. (See Waller, supra, 11 Cal.4th at p. 18 [ordinary rules of contract interpretation apply to insurance contracts, and clear and explicit meaning of written policy terms "controls judicial interpretation"].)
In fact, the Liquor Liability Policy itself provides ample support for a narrow interpretation of the scope of its coverage. As discussed above, such an interpretation is consistent with the literal terms of the policy, as well as with the policy's title ("Liquor Liability Policy") and the fact that Martini Ranch was required in the insurance contract itself, "[a]s a condition precedent to coverage," to maintain a more broadly applicable general liability policy. Given Martini Ranch's status as a bar and nightclub, were this court to adopt Martini Ranch's interpretation of the insurance contract — that the policy covers any claim against Martini Ranch whose underlying fact pattern includes patrons' consumption of alcohol — the coverage would be so broad as to effectively render the Liquor Liability Policy itself a general liability policy. (See FMC Corp. v. Plaisted and Companies (1998) 61 Cal.App.4th 1132, 1146 [contrasting " 'general liability' " policies, "which afford relatively broad coverages," with polices that "are explicitly limited to specifically defined areas of liability"].)
In sum, as there was no possibility that Martini Ranch's liability, if any, in either the Yerid or Noland/Kinchin lawsuit could arise out of its provision of alcohol, there was no potential for coverage under the Liquor Liability Policy, and the trial court did not err.
Further, once the trial court correctly ruled that the Liquor Liability Policy did not apply, it also properly dismissed Martini Ranch's good faith and fair dealing claim, including the contention that Columbia Casualty conducted an inadequate investigation because it relied solely on the complaint in denying coverage. Such a claim is derivative of an underlying contractual obligation, and absent such an obligation has no independent force. (Waller, supra, 11 Cal.4th at p. 36 ["if there is no potential for coverage and, hence, no duty to defend under the terms of the policy, there can be no action for breach of the implied covenant of good faith and fair dealing"]; 2 Witkin, Summary of Cal. Law (10th ed. 2005) Insurance, § 248, p. 367 ["Because the implied covenant of good faith and fair dealing is based on the contractual relationship between the insured and the insurer, a bad faith claim cannot be maintained unless policy benefits are due"].)
We by no means condone the cursory investigation that appears to have been undertaken in the instant case by Columbia Casualty. Nevertheless, we reject Martini Ranch's argument that a more thorough investigation would have altered the conclusion as to policy coverage. (See Gray v. Zurich Ins. Co. (1996) 65 Cal.2d 263, 276, 277 [recognizing that "the duty to defend should be fixed by the facts which the insurer learns from the complaint, the insured, or other sources" while leaving for later courts to "set out when and upon what other occasions the duty of the insurer to" investigate the possibility of coverage arises].) Even assuming that a more thorough investigation would have revealed that Yerid and Noland/Kinchin had consumed alcohol during their patronage of Martini Ranch, this fact would not have changed the ultimate legal conclusion that Martini Ranch's potential liability for the allegedly assaultive and defamatory acts of its bouncers did not arise from the furnishing of alcohol. (See Baroco West, Inc. v. Scottsdale Ins. Co. (2003) 110 Cal.App.4th 96, 103 [recognizing that in some circumstances, at least, "the insurer satisfies its duty to investigate by considering the complaint and the terms of the policy"].)
DISPOSITION
Affirmed.
WE CONCUR, HUFFMAN, Acting P. J., McINTYRE, J.
"1. [Columbia Casualty] will pay those sums that you become legally obligated to pay as damages because of injury to which this insurance applies sustained by any person if liability for injury arises out of the selling, serving or furnishing of any alcoholic beverage. . . . [¶] 2. No other obligation or liability to pay sums or perform acts or services is covered unless explicitly provided for . . . ."