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Clear Language of Liquor Exclusion Trumps Insured's Claimed Expectation (PA)

January 10, 2020

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<p style="text-align: justify;">When faced with clear policy language barring coverage under a liability policy, insureds often come up with creative arguments that their expectations can trump clear policy language.  But as one recent Pennsylvania decision makes clear, that does not always work.</p>
<p style="text-align: justify;">In <em><a href="https://www.wcmlaw.com/wp-content/uploads/2020/01/Transportation-Insurance-Co-v-Heathland-Hospitality-Group-LLC.pdf">Transportation Ins. Co. v Heathland Hospitality Group LLC</a>, </em>the wife of a man killed in a car accident by a drunk driver sued the country club that allegedly over-served the driver.  The country club sought defense and indemnification under a commercial general liability policy with Transportation Insurance Company and an umbrella policy with Continental Casualty (carriers collectively referred to as “T&amp;C”). Both policies included liquor liability exclusions. Transportation’s exclusion stated “This insurance does not apply to bodily injury for which any insured may be held liable by reason of: (1) causing or contributing to the intoxication of any person; (2) the furnishing of alcoholic beverages to a person under the legal drinking age or under the influence of alcohol; or (3) any statute, ordinance, or regulation relating to the sale, gift, distribution or use of alcoholic beverages.” That exclusion contained an exception stating that the liquor liability exclusion “applies only if you are in the business of manufacturing, distributing, selling, serving, or furnishing alcoholic beverages.”</p>
<p style="text-align: justify;">In arguing the exclusion did not apply, the country club argued that it was not in the business of distributing or selling alcohol.  On a surface level, this argument was fairly creative.  After all, the country club was not primarily in the business of selling alcohol; and, when one thinks of a business in the business of distributing or selling alcohol, what comes to mind is a bar, a place where there is often beer, wine, or liquor; someone serving drinks; and likely a place to set down that drink.</p>
<p style="text-align: justify;">Nonetheless, the Third Circuit ruled that the exception to the exclusion did not apply because because the underlying complaint alleged that Heathland was in the business of selling or furnishing alcohol.  It was also alleged that Heathland managed the country club’s beverage sales, supervised employees in their sale of beverages, and trained employees in beverage sales. Ultimately, the court determined that for purposes of the applicability—or lack thereof—of the above referenced insurance policies, Heathland was in the business of furnishing alcohol. Therefore, the court concluded that Heathland was not covered under the T&amp;C policies.</p>
<p style="text-align: justify;"><em>Heathland </em>is an important decision because it was a victory for those who emphasize the necessity of courts applying clear policy language over an insured's claimed expectations.</p>
<p style="text-align: justify;"><span>Thanks to John Lang for his contribution to this post.  Please email <a href="mailto:mgauvin@wcmlaw.com">Michael Gauvin </a></span><span>with any questions.</span></p>

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