Court rules bar's negligence not covered by CGL policy

As stated above, BODA’s policy from Acceptance included both CGL and Liquor Liability coverage. The $1 million policy limit asserted by Acceptance applied to the Liquor Liability coverage and represented the most Acceptance would pay for all of the injuries caused by one individual. However, the insurer argued that the CGL portion of the policy excluded coverage for any sort of liquor-related liability.

The injured parties argued they were entitled to $4 million in coverage because they had alleged two claims under each coverage part: one for BODA’s alleged negligence in hiring, training, and supervising the bartenders who had overserved Bell, and a second for negligently serving the alcohol to Bell. These claims, they said, were not precluded by the CGL form’s liquor liability exclusion because they alleged negligence, no liquor liability.

Liquor liability and CGL coverage

Whether or not coverage for the claims was available under BODA’s CGL policy was a matter of law. The policy explicitly stated that CGL coverage was unavailable for any physical injuries “for which any insured may be held liable by reason of: (1) Causing or contributing to the intoxication of any person;...This exclusion applies only if you are in the business of manufacturing, serving or furnishing alcoholic beverages…” (emphasis added).

None of the injured parties denied that BODA’s CGL policy included a liquor liability exclusion. However, they emphasized that they were bringing two entirely separate claims under each coverage part against BODA: negligent hiring, training, and supervising their bartenders, and negligence in overserving alcohol to Bell. Even if the claim for BODA’s alleged negligence in serving Bell too much alcohol failed under the CGL coverage, the claim for negligent hiring, training, and supervising would survive.

Acceptance, on the other hand, said the causal connection between BODA’s allegedly negligent hiring, training, and supervising of their staff would not exist without the claim of overserving alcohol to Bell. Therefore, the injured parties’ first negligence claim was also excluded from the policy’s CGL coverage.

The insurer cited Federated Mut. Ins. Co. v. Piedmont Petroleum Corp., 444 S.E.2d 532 (S.C. Ct. App. 1994) for support. In that case, which also centered on dram shop liability and alleged negligent hiring, training, and supervising, the Court of Appeals of South Carolina determined that, absent the defendant’s allegedly negligent sale of alcohol, there was no independent action connecting the plaintiff’s injuries to the defendant’s alleged negligence. Therefore, since the injuries could not be separated from the allegedly negligent alcohol sale, coverage was unavailable due to the policy’s liquor liability exclusion. Then, in Oceola Development & Construction, LLP, v. Int'l Ins. Co. of Hannover, PLC, 2020 U.S. Dist. LEXIS 60083 (D.S.C. 2020), the federal district court for the District of South Carolina held that a claim arising out of an assault and battery incident was subject to an assault and battery exclusion because “the underlying negligence claims would fail without the intentional act because the intentional act is the causal connection between [the] alleged negligence and [the] resulting injury” (emphasis added).

The injured parties responded with the argument that, under James v. Kelly Trucking Co., 661 S.E.2d 329 (S.C. 2008), an employer’s liability for his or her employee’s alleged negligence was a distinct and separate matter from negligent hiring and supervision. The judges in this case were not persuaded. They pointed out that the issue in James was a claimant’s right to file separate suits against both a tortfeasor and his or her employer.

Consistent with the appellate court’s decision in Federated Mutual, the judges in this case determined that, “without that sale [of alcohol], there is no causal link by which [BODA's alleged] negligence can be independently connected to” the harms suffered by the injured parties. Therefore, CGL coverage was unavailable for any of the injured parties’ claims.

“Aggregated” liability

Next, the injured parties argued that, even without CGL coverage, they were still entitled to $2 million under the policy’s liquor liability coverage because they had brought separate causes of action against BODA and against BODA’s employees. They also pointed out that, though the policy stated that the “‘Each Common Cause Limit’ of $1 [million]...[was] the most [Acceptance] will pay for all injury sustained by one or more person or organizations as the result of the selling, serving, or furnishing of any alcoholic beverage to any one person" (emphasis added), the policy did not define “each common cause.” According to the injured parties’ interpretation, “each common cause” referred to the “cause” of injury itself, while also implying that multiple insureds–i.e. BODA and its employees–could be considered the “cause of the injury,” so they were entitled to compensation from each insured that had caused their injuries.

The court was skeptical, particularly since the only support the injured parties offered for their interpretation was the dictionary. Imputing the injured parties’ definition of “each common cause” to BODA’s policy would force the judges to interpret the language in a manner contravening both the policy and South Carolina law. The policy never equated the cause of an injury to “each common cause.” Rather, it specifically stated that “the Each Common Cause Limit is the most we will pay for all injury sustained by one or more person or organizations as the result of the selling, serving, or furnishing of any alcoholic beverage to any one person” (underline omitted, bold added).

The injured parties’ claims all related to “the selling, serving, or furnishing of…alcoholic beverage[s]” to a single person: Bell. It was true that the injured parties had filed their claims against BODA separately from their claims against BODA’s employees. However, though the claims were legally separate, they all arose from the same cause of action: serving Bell too much alcohol. Therefore, the $1 million limit applied.

Conclusion

Since no coverage was available under CGL coverage, and the injured parties’ claims all arose from a single cause of action, the court granted summary judgment in favor of Acceptance. The motions filed by the injured parties and by BODA were all denied.

Editor’s Note: Liquor liability is tricky. Sometimes, it’s hard to tell whether to draw a causal connection from a claimant’s injuries to the service or overservice of alcohol to a person, or to make that connection to an entirely independent event.

In this case, the injured parties argued their claims should be covered by the CGL portion of BODA’s policy because they were claims for negligence, not liquor liability. However, as the court pointed out, the only connection between the injuries suffered and the alleged overservice of alcohol was the act of serving Bell too much alcohol. Had Bell not been overserved at the bar, the injured parties would not have the grounds to file claims against BODA.

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