Author: Mario Iveljic Business Risk Manager and Insurance Coverage Lawyer
Restaurant and bar owners – do you think you’d have insurance coverage in this situation? You own 2 bars. Your employees at Bar 1 serve a patron with alcohol. Police are forced to remove the patron from Bar 1 as he got out of hand because he was drunk. At about the same time, one of your employees from another bar – Bar 2 – stops by Bar 1 to see if the employees at Bar 1 need any help. While in the parking lot of Bar 1, this individual orders the patron to leave the parking lot of Bar 1, threatening bodily harm to the patron if he didn’t leave. The patron then gets in his car, drives away, and then gets into a serious car accident after blowing a stop sign a few miles away.
This is the fact pattern that the Indiana Supreme Court had to deal with in Ebert et al. v. Illinois Casualty Co. to determine whether the insurance carrier for the restaurants and its owners, Illinois Casualty Company, owed any duty to defend or indemnify the restaurants or its owners for the underlying personal injury lawsuit. After reviewing the facts, the insurance policies and relevant case law, the Indiana Supreme Court determined that Illinois Casualty Co. owed no duty to defend or indemnify the restaurants or its owners in this situation.
Illinois Casualty issued separate businessowners policies to each restaurant, or “show club” in this case – Big Daddy’s Show Club and Little Daddy’s Show Club. Each policy had an identical liquor liability exclusion which stated that the insurance does not apply to bodily injury or property damage for which any insured may be held liable by reason of causing or contributing to the intoxication of any person; this exclusion applied even if the claims allege negligence or other wrongdoing in failing to provide transportation with respect to any person that may be under the influence of alcohol. The Court found this exclusion to be unambiguous and specifically excluded coverage for the claims being raised in the underlying lawsuit – namely, claims that (1) Big Daddy negligently violated Indiana’s Dram Shop Act by continuing to serve the patron alcohol when it knew, or should have known, he was inebriated; and (2) Big Daddy’s carelessly and negligently continued to serve the patron alcohol and failed to obtain alternative transportation for whim when they knew, or should have known, of his inebriation and impairment.
The Court also noted that the Little Daddy’s businessowners policy did not provide coverage, either. First, the lawsuit alleged that Little Daddy’s contributed to the patron’s intoxication and failed to obtain alternative transportation; but, these allegations fall squarely within the language of the liquor liability exclusion. Second, the individual who forced the patron to get in his car and leave the parking lot was not acting as an employee in the scope of employment of Little Daddy’s; therefore, he was not an insured for purposes of Little Daddy’s businessowners policy.
This case presented a variety of issues that all restaurant and bar owners should be aware of when it comes to operating their business, and it is crucial that you understand the terms of your insurance policy to see what activities are covered, what activities are not covered, and what activities are excluded by the terms of your insurance policy. When in doubt, reach out to an experienced insurance broker or insurance coverage attorney to make sure you are covered!