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 a setback recently with a court ruling that serving two drinks to one drunk does not constitute two insurable occurrences.

Reversing a trial court ruling in Spratt v. Crusader Insurance Co., a state Court of Appeals in Spokane concluded on Jan. 15 that liquor liability insurance is not designed to cover each drink served to an intoxicated customer.

Lawrence Spratt bought liquor liability coverage for his Big Foot Pub & Eatery from Crusader Insurance Co. The policy provided 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, a provision called "each common cause limit." The policy described this as the most that Crusader would pay for all injury sustained by one or more persons "as the result of the selling, serving or furnishing" of alcohol "to any one person."

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

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

Mr. Spratt in turn filed an action against Crusader for a declaration that the maximum coverage under the Crusader policy was a total of $2 million, or $1 million for each of the two drinks served 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 the phrase could be interpreted to mean each act of serving an alcoholic beverage.

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

More specifically, the appeals court found that "any" did not mean "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 grant summary judgment for Crusader.

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

Commenting on the appellate court opinion, the National Association of Independent Insurers, based in Des Plaines, Ill., said that the decision was in line with a friend-of-the-court brief that 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 has extended coverage "for every single glass that is put before a patron."

Like the appellate court, Ms. McGuire does not think the policy term "occurrence" is ambiguous. "Typically, when you take a look at the policies, the word 'occurrence' is clearly defined," she noted.

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

The argument that a policy term is ambiguous is a particularly attractive tactic. One of the traditional rules of insurance-policy construction that if a term is found ambiguous, the court interprets in favor of the claimant and against the insurer, who has drafted the policy language, Ms. McGuire added.

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

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

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

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Court To Pub: Only One Claim Per Drunk

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