The Third-Circuit of Appeals recently issued a non-binding ruling which upheld carriers’ liquor liability exclusions in policies issued to the managing entity of a country club. The Third-Circuit, in Transportation Insurance Co; Continental Casualty Co v. Heathland Hospitality Group, LLC, et al, 2-15-cv-04525 ruled that the carriers were correct in denying coverage to the managing entity for a claim brought by the widow of an individual who was fatally struck by a drunk driver. The driver allegedly consumed alcohol at the club. The widow sued the manager of the club alleging that it sold, or continued to serve, alcohol to the individual who was involved in the accident with her late husband despite being visible intoxicated. She further alleged that the manager was responsible for the individual's intoxication and subsequent death of her husband. The widow also made claims that the manager did not provide adequate training to its employees over the sale or service of alcohol. Pursuant to the requisite policies it possessed, the managing entity sought a defense and indemnification from its general liability carrier and umbrella carrier. The carriers denied the claim based upon the liquor liability exclusions in the policies. The managing entity settled with the widow and assigned its rights against the carriers to her.

The carriers then filed a declaratory action against the manager in the Eastern District of Pennsylvania seeking a ruling stating that they had no contractual obligation to indemnify and provide a defense to the manager because the liquor liability exclusions provided an exemption to the claims. The exclusion applied for entities "in the business of manufacturing, distributing, selling, serving or furnishing alcoholic beverages."

The carriers filed a motion for summary judgment on this issue, which was granted by the district court. The manager appealed. The manager argued that the exclusions did not apply because it was not “in the business of . . . selling, serving, or furnishing alcoholic beverages” at the club. The Court disagreed holding that the widow’s complaint sufficiently alleged that the club “was a business establishment that sold alcoholic beverages.” Further, the managing entity managed the club’s “‘food and beverage sales and services,’ and trained and supervised [the club]’s employees as to those sales and services.” Third, the Court noted that the club and/or the manager “sold or gave alcoholic beverages” to the allegedly intoxicated driver. This individual consumed the alcohol at the club’s premises. It noted that, “the complaint unequivocally allege[d] that [the manager] was ‘in the business of . . . selling, serving or furnishing’ alcohol at [the club].”

The Court also dismissed the manager’s arguments that the exclusions only applied to some of the widow’s negligence related claims. The Court held that, even if some of the claims did not relate to the service of alcohol, they were related closely enough whereby the exclusion would still apply to the carriers. As alluded to above, Third-Circuit held that “the District Court did not err by holding that [the carriers] had no duty to defend and indemnify [the managing entity]” pursuant to the exclusion which barred coverage.

Contact us to discuss this important ruling which may affect your Dram Shop Case and deals with vital coverage issues.