Court To Pub: Only One Claim Per Drunk

By E.E. Mazier

NU Online News Service, Jan. 28, 4:12 p.m.EST?Pub owners in the state of Washington suffered asetback recently with a court ruling that serving two drinks to onedrunk does not constitute two insurable occurrences.

Reversing a trial court ruling in Spratt v. CrusaderInsurance Co., a state Court of Appeals in Spokane concludedon Jan. 15 that liquor liability insurance is not designed to covereach drink served to an intoxicated customer.

Lawrence Spratt bought liquor liability coverage for his BigFoot Pub & Eatery from Crusader Insurance Co. The policyprovided an "aggregate limit" of $2 million for "all injury"resulting from the selling, serving or furnishing of alcohol.

The policy also contained, subject to the aggregate limit, aprovision called "each common cause limit." The policy describedthis as the most that Crusader would pay for all injury sustainedby one or more persons "as the result of the selling, serving orfurnishing" of alcohol "to any one person."

In June 1998 Ida Jane Burrows and two of her children wereinjured and another child died when their car was hit by RandyQuaale, an allegedly drunken Big Foot patron.

Ms. Burrows, her surviving children, and the deceased child'sestate filed a negligence lawsuit against Mr. Spratt. Theplaintiffs claimed that Mr. Quaale was served at least two drinksat the Big Foot while he was obviously intoxicated.

Mr. Spratt in turn filed an action against Crusader for adeclaration that the maximum coverage under the Crusader policy wasa total of $2 million, or $1 million for each of the two drinksserved to Mr. Quaale.

In granting summary judgment to Mr. Spratt and the Burrowses,the trial court concluded that the words "any alcoholic beverage"in the policy were too ambiguous. The court reasoned that thephrase could be interpreted to mean each act of serving analcoholic beverage.

On Crusader's appeal, the Court of Appeals determined that Mr.Spratt's interpretation of the phrase was unreasonable "in thecontext of the policy or of the common definitions of theterms."

More specifically, the appeals court found that "any" did notmean "each" and that "beverage" did not mean "serving of a liquid"or "unit of measure of a liquid," as claimed by Mr. Spratt.Accordingly, the appeals court ordered the trial court to grantsummary judgment for Crusader.

In a concurring opinion, two judges noted that the insurancepolicy referred to the coverage as $1 million "per occurrence" butthat the word "occurrence" was not defined in the policy.

Commenting on the appellate court opinion, the NationalAssociation of Independent Insurers, based in Des Plaines, Ill.,said that the decision was in line with a friend-of-the-court briefthat the group had filed in the case.

Monika McGuire, NAII assistant general counsel, legal services,said she has not heard of any other case in which a court hasextended coverage "for every single glass that is put before apatron."

Like the appellate court, Ms. McGuire does not think the policyterm "occurrence" is ambiguous. "Typically, when you take a look atthe policies, the word 'occurrence' is clearly defined," shenoted.

However, since coverage depends on the definition of the word,claimants try to construe it in a manner that expands the coveragebeyond what was originally intended.

The argument that a policy term is ambiguous is a particularlyattractive tactic. One of the traditional rules of insurance-policyconstruction that if a term is found ambiguous, the courtinterprets in favor of the claimant and against the insurer, whohas drafted the policy language, Ms. McGuire added.

She also sees advantages to both insurers and consumers in theCourt of Appeals' decision not to expand coverage "beyond the clearlanguage of the insurance policy."

Ms. McGuire stated that there is a real need "for some level ofpredictability," for both parties to know what is going to becovered under different policies.

"Cost is driven by the predictability," she continued. Thus, ifthe scope of the coverage is made on a case-by-case basis, withcourts extending coverage "for every single glass that is given toa patron," she noted, "it would be almost impossible for insurancecompanies to price their products and in turn for insuranceconsumers to buy the correct product."