There are times when a liability that seems like it will never be covered by an insurance policy actually does get covered. Mesa Underwriters Specialty Ins. Co. v. Secret’s Gentleman’s Club is just such a case.
In April 2014, twenty-two-year-old Desiree Snyder died as the result of a head-on auto crash. The driver of the other car was highly intoxicated and driving the wrong way on an interstate highway. Minutes before the accident, the driver was kicked out of an adult entertainment bar, Secret’s Gentleman’s Club (“Secret’s”), insured by Mesa Underwriters under a commercial general liability (CGL) policy. The CGL policy contained a liquor-liability exclusion that excluded coverage for bodily injury by reason of “causing or contributing to the intoxication of any person,” “the furnishing of alcoholic beverages to a person … under the influence of alcohol,” or “any statute, ordinance or regulation relating to the sale, gift, distribution or use of alcoholic beverages.”
Snyder’s parents filed suit against Secret’s. Thereafter, citing to the liquor-liability exclusion, Mesa refused to cover Secret’s. The suit against Secret’s produced an $8 million judgment, prompting Mesa to file a separate action in federal court seeking a declaration confirming it had no liability in reference to the judgment or to Secret’s defense costs. Given the plain language of the liquor-liability exclusion, it might seem obvious that Mesa would win. Wrong.
While the lawsuit against Secret’s was peppered with allegations that Secret’s over-served Vargas in violation of Ohio’s Dram Shop statute, the plaintiffs also alleged ordinary negligence. At trial, it was discovered that the driver originally began drinking at home, continued drinking in a liquor store parking lot, and then drank at two other adult entertainment bars, all before he arrived at Secret’s. On his arrival there, and before he consumed any more alcohol, he was already highly intoxicated and disruptive, at one point assaulting one of the bar’s dancers.
As the trial in the wrongful death action neared, all claims related to the service of alcohol by Secret’s were stripped out of the case, allowing the trial to go forward on only the negligence claim, a claim that essentially alleged that Secret’s failed to take appropriate steps under the circumstances, such as alerting the authorities about Vargas and/or preventing him from driving off. Because that claim was wholly unrelated to the provision of alcohol by Secret’s, the Federal Appeals Court agreed that the judgment and all of the defense costs were covered under the policy.
So remember, if there is ever a possibility that a claim could be covered under your policy, don’t give up easily. Secret’s had more than 8 million reasons not to give up, and your claim is just as important to you.
Evan S. Schwartz
Founder of Schwartz, Conroy & Hack