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

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

November 10, 2016




         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) ...

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