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Atlantic Casualty Insurance Co. v. Adam Harris

February 18, 2010

ATLANTIC CASUALTY INSURANCE COMPANY, PLAINTIFF,
v.
ADAM HARRIS, INC., D/B/A LENNY'S TAVERN, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Herndon, Chief Judge

MEMORANDUM & ORDER

I. Introduction and Background

Before the Court is plaintiff Atlantic Casualty Insurance Company's Motion for Summary Judgment (Doc. 21), to which defendant Adam Harris, Inc., d/b/a Lenny's Tavern ("Lenny's Tavern") has responded in opposition (Doc. 28), and Plaintiff thereafter replied (Doc. 34). Plaintiff, as the insurer, and Lenny's Tavern, as the insured, entered into a contract for liability insurance, Policy No. M051000120, effective November 20, 2005 through November 20, 2006 (hereinafter, the "Policy"). Lenny's Tavern is currently involved in a lawsuit with his co-defendant in the instant matter, Joe L. Hays ("Hays"), entitled Joe L. Hays v. Leonard Fowler d/b/a Lenny's Tavern, filed in the Circuit Court of Madison County, Illinois, Case Number 08-L-322 (hereinafter the "underlying suit"). Plaintiff is currently providing a defense on behalf of Lenny's Tavern in the underlying suit under the terms of Policy and pursuant to a complete reservation of rights. However, Plaintiff believes the language of the Policy excludes coverage and thus, there is also no duty to defend, which is also the basis for Plaintiff's Complaint for Declaratory Judgment (Doc. 2).

Plaintiff seeks the following relief: (1) a declaration that the underlying suit alleges an assault and/or battery by patrons of Lenny's Tavern, for which any duty to defend pursuant to the Policy is precluded by the terms of the Policy's Exclusion for Assault and/or Battery; (2) a declaration that any alleged failure of Lenny's Tavern to prevent or suppress the alleged assault and/or battery is also squarely precluded under the Policy pursuant to the Exclusion for Assault and/or Battery; (3) a declaration that Plaintiff has no obligation to defend or indemnify Lenny's Tavern under the Policy in connection with the underlying suit; and (4) a declaration that Defendants in this suit have no rights under the Policy in connection with the underlying suit (see Doc 2, pp. 7-8; Doc. 21, pp. 8-9).

In response, Lenny's Tavern argues that Plaintiff is estopped from denying coverage or its duty to defend for its failure to specifically inform its insured of a conflict of interest regarding the underlying suit and the less-than-vigorous defense provided to Lenny's Tavern in the underlying suit from the counsel hired by Plaintiff on behalf of its insured (Doc. 28). In its Reply, Plaintiff argues that the Exclusion in the Policy applies to either theory of liability (intentional versus negligence) in the underlying suit, so there is no conflict of interest and as such, estoppel does not preclude its right to seek declaratory relief.

A. The Underlying Suit

In the underlying suit, Joe L. Hays ("Hays") (one of Defendants in the instant suit), filed suit against Leonard Fowler d/b/a Lenny's Tavern, bringing three counts: (1) premises liability, (2) intentional tort, and (3) negligence (Doc. 2, Ex. 2 -underlying complaint). The underlying suit was filed on April 16, 2008, and alleges that on July 21, 2006, while Hays was lawfully on the premises of Lenny's Tavern as an invitee, he was attacked after exiting the men's restroom. Specifically, he alleges than upon exiting the men's restroom and returning to the bar area, one of the patrons, without provocation, placed Hays in a bear-hug hold and held him while other bar patrons hit him in the head and body with beer bottles, baseball bats, sticks and bricks, kicked and punched him in the face and then stabbed him twice in the back (Id.). Hays further alleges that although he cried out for help several times, none of the employees of Lenny's Tavern would call 911, and it was not until another bar patron finally called 911 that he was able to get any help. Hays was thereafter taken by ambulance to Gateway Regional Medical Center in Granite City, Illinois, where it was determined he suffered considerable blood loss. He was then transported to St. Louis University Hospital. Hays alleges that as a result of this attack at Lenny's Tavern, he suffered a punctured lung and remained hospitalized for two days as he needed to be on oxygen. Due to continued pain to his side and chest, Hays also alleges his inability to continue his work as a roofer.

Each of the three counts in the underlying suit contain the same allegations: that Lenny's Tavern was negligent in failing to avoid harm to Hays from negligent or intentional attacks of third persons in the following respects: (A) failed to exercise ordinary care in protecting its patrons, including Hays, from physical harm by persons on or about the premises; (B) failed to act as a reasonable person in avoiding harm to its invitees including Hays, from negligent or intentional attacks of third persons; and (C) failed to act as a reasonable person in avoiding harm to its invitees including Hays, by not rendering assistance to Hays after the unprovoked attack on him when he requested assistance for his impairment (see Doc. 2, Ex. 2, ¶¶ 17-19 for Counts I, II & III).

B. The Policy

Plaintiff sent Lenny's Tavern a Reservation of Rights letter, dated May 21, 2008 (Doc. 28, Attachment 1). This letter explained that pursuant to a review of both the Policy and the underlying suit, Plaintiff had determined there was no coverage under the Policy, but that it agreed to defend this matter on behalf of Lenny's Tavern under a complete reservation of rights. It thereafter listed the various provisions and exclusions of the Policy which it believed supported the finding of no coverage. It also provided the information for the appointed defense counsel, explaining that if it was later determined through a declaratory action that there was, in fact, no coverage, Plaintiff would be entitled to reimbursement of any sums paid. The instant declaratory judgment suit was filed on September 17, 2008 (Doc. 2).

Plaintiff's basis for summary judgment relies upon the provisions and exclusions of the Policy, which mirrors the allegations in its complaint for declaratory relief (Doc. 2), and its Reservation of Rights letter. The provisions and exclusions relevant to Plaintiff's summary judgment argument are as follows:

THE POLICY

SECTION 1 - COVERAGES COVERAGE A - BODILY INJURY AND PROPERTY DAMAGE LIABILITY

1. Insuring Agreement

a. We will pay those sums that the insured becomes legally obligated to pay as damages because of "bodily injury" or "property damage" to which this insurance applies. We will have the right and duty to defend the insured against any "suit" seeking those damages. However, we will have no duty to defend the insured against any "suit" seeking damages for "bodily injury" or "property damage" to which this insurance does not apply.

***

b. This insurance applies to "bodily injury" and "property damage" only if:

(1) The "bodily injury" or "property damage" is caused by an "occurrence" that takes place in the "coverage territory";

***

2. Exclusions

c. Liquor Liability

***

"Bodily injury" or "property damage" for which any insured may be held ...


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