Reinsurance Law Blog : Oklahoma Insurance Lawyer & Attorney : Stauffer & Nathan Law Firm

Mount Vernon Fire Ins. Co. v. Okmulgee Inn Venture

Mount Vernon issued a liquor liability policy insuring Okmulgee Inn for liability for injuries imposed on the insured by reason of the selling, serving or furnishing of any alcoholic beverage. Okmulgee was sued by three patrons who were injured in a bar fight on the premises. Mount Vernon said it had no duty to defend the subsequent lawsuit because the allegations did not indicate the patrons’ injuries were caused by the selling, serving, or furnishing of alcoholic beverages. The trial court agreed, but the Tenth Circuit reversed.

Okmulgee argued there was a duty to defend because the victims were served alcohol, witnesses referred to beer bottles being used in the bar fight just before the shooting, and a police report from a prior incident revealed that the shooter previously had been arrested at the same bar for public intoxication. Mount Vernon said there was no evidence that the shooter had been served or furnished any alcohol, or that alcohol precipitated the shootings. The Tenth Circuit said that the facts showed there was a credible possibility that alcohol contributed to the injuries. The district court arrived at a different conclusion because the victims’ complaints did not specifically allege that alcohol caused the injuries, and the district court declined to make that assumption based on the circumstances. The Tenth Circuit found the district court’s analysis was too restrictive. “The duty to defend cannot be limited by the precise language of the pleadings. The insurer has a duty to look behind the third party's allegations to analyze whether coverage is possible.” Based on the nature of the facts gleaned from the underlying complaints and other materials, the Tenth Circuit concluded “there is a possibility of coverage. Consequently, Mt. Vernon is obligated to defend its insured, and Okmulgee is entitled to summary judgment on the duty-of-defense issue.” But the court declined to decide whether Mount Vernon had any duty to indemnify Okmulgee, prior to a determination of any liability of Okmulgee to the patrons. “[I]f Okmulgee is found to be liable for any claims, Mt. Vernon's duty of indemnification will extend only to those claims falling within the scope of the policy.”

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Arthur L. Been, who was sentenced in 2007 to serve concurrent terms for assault with a dangerous weapon, malicious injury/destruction of property, obstructing a police officer, and public intoxication following an altercation at a bar. He sued the bar, claiming if he hadn't been drunk, he wouldn't be in jail.  Summary judgment to the bar affirmed.

BEEN v. MK ENTERPRISE, INC.; 2011 OK CIV APP 70

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Alea London Ltd. v. Canal Club, Inc., 2010 OK CIV APP 33 is an odd case. It starts out as a liquor liability exclusion case and ends up being an assumption of liability case. Canal Club was the insured, and Alea the insurer. Canal Club was sued when an intoxicated patron (Valle) left its premises and was involved in a car accident which hurt two people. It was claimed that Canal served Valle when he was obviously intoxicated, a dram shop claim. Alea refused to defend the case because of its liquor liability exclusion. Another insurer (with lower limits) defended Canal, and Alea filed a declaratory judgment action, seeking a declaration that it had no coverage under its policy. The underlying case was then amended to add a second claim that Valle became intoxicated before entering Canal Club’s premises, its employees escorted him from those premises while he was still in an intoxicated state, and those employees negligently breached a duty of reasonable care when they “failed to make sure” Valle did not leave the area outside its premises, get into his car, and drive while he was intoxicated. Alea was not notified of the change in the allegations.  

In the underlying action, the first claim was dismissed, and Canal admitted liability on the second claim. A non-jury trial settled the amount of the damages. Then, the action switched back over to the declaratory judgment case. On cross motions for summary judgment, the trial court found that Alea was liable for the claims. The Court of Civil Appeals (COCA) reversed, finding no coverage for the claims. 

First, it found that Canal Club had an obligation to notify Alea of “critical post-denial developments” and the failure to do so “may modify, excuse or provide a defense to the performance of an insurer’s contractual duties.” Second, the COCA found that there was no duty under Oklahoma law which required Canal Club to prevent a drunk patron from leaving its premises and driving his own vehicle. As a result, the admission of liability in the underlying case triggered an assumption of liability exclusion. That exclusion precluded coverage” for which the insured is obligated to pay damages by reason of the assumption of liability in a contract or agreement;” but the exclusion does not apply if the insured would be liable even in the absence of any agreement.  

The court finds there would be no duty on the part of Canal Club to restrain Valle if he were not drunk, and no duty to restrain him simply because he was drunk – where Canal Club had not served Valle any drinks.  As a result, “Coverage under the CGL policy was not triggered by the basis for judgment in the underlying lawsuit.” In other words, the only reason Canal Club had any liability is because it agreed or confessed it. This brought the claim within the assumption of liability exclusion and the policy did not provide coverage. The court reversed and remanded, ordering that judgment be entered for the insurer.

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