A Delaware court has ruled that insureds were in the business of “furnishing alcoholic beverages” within the meaning of a liquor liability exclusion in an insurance policy even if they did not actually pour drinks but only arranged for alcohol to be served at events.
|The Case
Capozzoli Catering of Delaware, Inc., planned and catered various social events at the Executive Banquet and Conference Center, located in Newark, Delaware. Capozzoli leased the center from Plumbers & Pipe Fitters Local No. 74. The lease agreement between Capozzoli and Local No. 74 stated that Local No. 74, “shall maintain the sole liquor license for the Premises and, in accordance therewith, will be solely responsible for distributing any and all alcohol … from the bar.”
On October 17, 2013, Capozzoli catered an event for the Alpha Epsilon Phi sorority at the Center. Local No. 74 provided bartenders to serve alcohol at the event. Ethan Connolly, a minor, allegedly attended the event and was served alcohol at the bar. Connolly allegedly left the event intoxicated and attempted to cross the road when he was fatally struck by oncoming traffic.
Connolly's parents filed a wrongful death lawsuit against Capozzoli and the Center, contending the defendants had proximately caused their son's death due to their negligence in failing to maintain the premises and ensure underage patrons were not served alcohol.
Harleysville Preferred Insurance Company and Nationwide Mutual Insurance Company, which had issued commercial general liability insurance policies to Capozzoli and the Center, filed a declaratory judgment action contending that they were not obligated to defend Capozzoli and the Center in the underlying suit because a liquor liability exclusion applied.
The insurers moved for summary judgment, arguing that Capozzoli and the Center were in the business of furnishing alcohol because they advertised bar options online, negotiated them directly with customers, and collected money from customers for alcohol and bartenders. The insurers also contended that Capozzoli and the Center were in the business of furnishing alcohol because they admitted that their ability to provide alcohol at events was “integral” to their business success.
Capozzoli and the Center argued that the liquor liability exclusion should be construed in their favor because they did not serve alcohol – Local No. 74 hired bartenders who served alcohol. Capozzoli and the Center said they did not hold the liquor license, and received none of the proceeds from the sale of alcohol on the premises.
The policies provided insurers had the: Duty to defend the insured against any “suit” seeking damages for…“bodily injury.” The liquor liability exclusion removed coverage for bodily injury when an insured may be held liable for: 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. This exclusion applied only if the insured was: in the business of manufacturing, distributing, selling, serving or furnishing alcoholic beverages.
|The court's decision
The court granted summary judgment in favor of the insurers and declared that “furnishing” something was “not limited to one physically handing something to another” but that one could furnish something to another “by providing the means for that person to obtain it.” The court concluded an important part of Capozzoli and the Center's business was contracting with interested customers about the bar services that would be offered at events. Therefore, Capozzoli and the Center were in the business of furnishing alcohol because part of their business was to arrange for alcohol to be served at events, and the exclusion applied to preclude coverage.
Steven A. Meyerowitz, Esq., is the director of FC&S Legal, the editor-in-chief of the Insurance Coverage Law Report, and the founder and president of Meyerowitz Communications Inc. This story is reprinted with permission from FC&S Legal, the industry's only comprehensive digital resource designed for insurance coverage law. Click here to subscribe.
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