General liability policies sometimes contain exclusions that preclude coverage for losses that relate to the business insured. Whether that renders the policy coverage illusory is a question for the courts. In a recent case, the 11th Circuit addressed an Absolute Liquor Liability Exclusion involving a night club.
In AIX Specialty Insurance Co. v. Members Only Managment, LLC, No. 19-12110 (11th Cir. Dec. 11, 2019) (Not for Publication), a patron at a nightclub allegedly drank too much, which caused her to lose control of her car resulting in the death of her two passengers. The estate for one of the passengers sued the night club for violating Florida’s Dram Shop Act. Here, even though the club did not sell alcohol, it allowed members to bring their own and provided staff to serve the alcohol. The insured night club tendered the defense to its liability insurer. The insurer defended under a reservation of rights, but brought a declaratory judgment action seeking a declaration that coverage was barred under the Absolute Liquor Liability Exclusion. The district court granted summary judgment for the insurance company. The 11th Circuit affirmed because the exclusion unambiguously barred coverage.
In so holding, the circuit court found the language of the exclusion to be clear. “There is no coverage for, among other things, a claim seeking recovery for bodily injury under ‘[a]ny statute, ordinance or regulation relating to the sale, gift, distribution or use of alcoholic beverages.’” Because the sole claim brought by the estate against the club was under the Dram Shop Act, the court held that the claim unambiguously fell outside of coverage.
The policyholder argued that the exclusion was so broad that it rendered coverage under the policy illusory. The argument, as the court understood it, was that since the club allows patrons to bring alcohol into the club, any claim for bodily injury could theoretically be connected to alcohol and would be barred by the exclusion. The court rejected this argument finding that the exclusion did not eclipse coverage. The exclusion, said the court, did not completely contradict the insuring provisions of the policy. Here, the court found that a trip and fall could occur and the club could be sued for ordinary negligence. The court gave other examples as well having nothing to do with alcohol. As the exclusion did not render coverage illusory, according to the court, it ultimately barred coverage for the claim brought by the estate.