According to Aspen, the $1 million liquor liability limit applied to the aggregate of all liquor liability claims levied against all insureds in the shared-risk program. Since Aspen had paid liquor liability claims for other insureds in the shared-risk group, Aspen could not complete its defense of DBD because the liquor liability limit would be exhausted before the underlying suit was resolved.

Colony argued Aspen's policy limit applied separately to each insured in the shared-risk program, meaning Aspen was obligated to cover $1 million in liquor liability claims for each insured in the shared-risk group. Aspen did not change its position and only reiterated that it could not complete its defense of DBD because Aspen would pay the liquor liability limit before litigation was finished.

Colony filed suit against Aspen and AGLIC. Colony moved for summary judgment, claiming Aspen had to pay the full, $1 million liquor liability limit before Colony's and AGLIC's excess coverage would apply. AGLIC agreed with Colony that Aspen had to pay the full $1 million liquor liability limit to defend DBD, but argued that the AGLIC policy would not be triggered until both Aspen's and Colony's policy limits had been exhausted. Aspen did not comment on either Colony's or AGLIC's claims, but maintained that the liquor liability limit would be exhausted before the suit against DBD concluded because the limit applied to the aggregated liquor liability claims of all insureds in the shared-risk program.

The Liquor Liability Endorsement

The judges pointed out that the three paragraphs of Aspen's liquor liability endorsement set clear parameters for the scope and amount of liquor liability coverage available. The first paragraph stated the $1 million liquor liability limit applied across the whole of the shared-risk pool to "all damages … included within the 'liquor hazard' that [are] sustained by one or more persons or organizations" who subscribe to the shared-risk program (emphasis original).  The "liquor hazard" referred to "all 'bodily injury' and 'property damage' arising out of the selling, servicing or furnishing of any alcoholic beverage(s)." 

The second paragraph further provided that $1 million was the greatest amount Aspen would pay for liquor-hazard-related claims "at each location to which [the] insurance applied." (emphasis original). The third paragraph stated the $1 million limit also represented the most Aspen would pay "as the result of the selling, serving or furnishing of any alcoholic beverage(s) to any one person." Taken all together, Aspen's liquor liability endorsement provided $1 million of coverage as the result of any one occurrence arising from the liquor hazard at any single insured location applied to all of the insureds who were part of the shared-risk pool. 

Unfortunately, this meant the amount of coverage available to the whole of the shared-risk pool decreased each time Aspen paid a claim to a pool member. However, contrary to Colony's claims, the second and third paragraphs of the liquor liability endorsement made no guarantee that each insured would have $1 million in liquor liability coverage available, whether it be on a "per-location" or "per-occurrence" basis. 

Ambiguity

Colony and AGLIC next claimed Aspen had not clarified to the 205 insureds in the shared-risk pool that Aspen's $1 million liquor liability limit applied to the pool as a whole. None of the insureds properly understood that each claim made by an insured and covered by Aspen reduced the amount of coverage available to the rest of the insureds in the pool. Without this clarity, the policy was ambiguous and should be construed in their favor and against Aspen. 

The court acknowledged that it was not easy to parse out the liquor liability coverage afforded by Aspen's policy. However, the court pointed out that complexity and ambiguity do not go hand-in-hand. An intricately designed policy could not be found ambiguous simply because it was harder and more time-consuming to interpret. 

Furthermore, the judges reminded Colony and AGLIC that they were not entitled to the same deference for ambiguity as other insureds. First, neither Colony nor AGLIC were insured under Aspen's policy, so they weren't entitled to deference of any kind. Second, the general rule that ambiguity is interpreted in favor of the insured and against the insurer does not apply when the party to be insured is a "sophisticated commercial insured." The insured under Aspen's policy was the administrator of the shared-risk pool who, according to the court, "undoubtedly qualified as a 'sophisticated commercial insured' that is not entitled to benefit from any ambiguity."

Conclusion 

The court found that Aspen was only obligated to cover the first $1 million for the aggregated liquor hazard claims. Furthermore, Aspen's policy was complex, but it was not ambiguous. Colony's and AGLIC's motions for a judgment on the pleadings were therefore denied. 

However, this case had centered on Aspen's policy and only Aspen's policy. Colony and AGLIC had not properly addressed the coverage available under their respective excess insurance policies. Therefore, the court specifically limited its ruling to the coverage provided by Aspen. 

Editor's Note: The parties in this case did not dispute the priority of the coverage available. Colony's and AGLIC's policies wouldn't be triggered until Aspen's policy limits had been exhausted. It was determining the application of Aspen's liquor liability limit that threw a wrench in the matter. The understanding of when a limit applies per loss or in an aggregate sense is important.

Read More: 

Liquor Liability Policy

Primary Versus Excess Coverage