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Third Circuit Holds Liquor Liability Exclusion Precludes Coverage for Intoxicated Pedestrian

Blogs, Insurance Coverage

The United States Court of Appeals for the Third Circuit recently upheld summary judgment in favor of State Automobile Mutual Insurance Company (“State Auto”), finding that the liquor liability exclusion in its general liability policy precluded coverage for bodily injuries sustained by a bar patron hit by a taxi after leaving the insured bar. State Automobile Mut. Ins. Co. v. Lucchesi, No. 12-2890 (3rd Cir. April 11, 2014).

The underlying suit arose in 2009 when Clinton Bonson (“Bonson”) left Champs Sports Bar (“Champs”) in State College, Pennsylvania after consuming numerous alcoholic beverages. As Bronson was walking across the street he was hit by a taxi and was seriously injured. Shortly thereafter, Bronson filed suit against the taxi driver, the taxi company, and Champs. In the underlying complaint, Bonson alleged Champs was liable for his injuries because the bar: (1) failed to cut off service, which enhanced his degree of intoxication in violation of principles of common-law negligence and Pennsylvania’s Dram Shop Act; and, (2) Champs allowed Bronson to leave the bar intoxicated in violation of its common-law duty to monitor the premises for visibly intoxicated persons and undertake appropriate precautions to ensure their safety.

Champs sought coverage under a commercial general liability policy issued by State Auto. State Auto provided Champs a defense subject to a reservation of rights and subsequently filed a declaratory judgment action in the District Court of Pennsylvania. In the declaratory judgment action, State Auto argued that the policy’s liquor liability exclusion barred coverage for the underlying suit. The policy’s liquor liability exclusion precluded coverage for damages for which the insured may be held liable by reason of its: “causing or contributing to the intoxication of any person,” “furnishing of alcoholic beverages to a person … under the influence of alcohol,” or violating a “statute … relating to the sale, gift, distribution, or use of alcoholic beverages.”

The District Court granted summary judgment in favor of State Auto, finding the sole basis for the claims set forth in the underlying complaint was the service of alcohol and thus, State Auto had no duty to defend under the policy. Bronson appealed arguing that the exclusion does not bar coverage for the claim that Champs allowed him to leave the premises intoxicated. 

On appeal, the Third Circuit first noted that the liquor liability exclusion in the policy was unambiguous and that the plain language of the exclusion would apply. The Court then noted that every claim in the underlying complaint sought damages for the bodily injuries sustained when Bronson was hit by the taxi and that Champs may be held liable because it furnished alcohol to Bronson. The Court rejected Bronson’s claim that the policy provided coverage for the claim that Champs allowed him to leave the bar while intoxicated. Specifically, the Court held, that under the policy, “if coverage of the former claim is excluded, so is coverage of the latter, as both claims sought damages because of the exact same bodily injury.” Accordingly, the Court held State Auto had no duty to defend or indemnify Champs with respect to the underlying suit. 

To read more about State Automobile Mut. Ins. Co. v. Lucchesi click here