Duty to Defend, Liquor Liability policy
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.”
