Indiana court finds insurer has no duty to defend in dram shop suit
The court found that the efficient and predominant cause of the victims' injuries was drunk driving precipitated by the negligent service of alcohol.
A liquor liability exclusion precluded any duty for an insurer to defend a suit in which an injured motorist claimed a bar had negligently allowed a customer to become inebriated, the Indiana Supreme Court decided. The case is Ebert v. Illinois Cas. Co., No. 22S-PL-8 (Ill. June 16, 2022).
On July 5, 2015, William Spence drank alcohol at a venue called Big Daddy’s Show Club and subsequently drove away in his truck. Meanwhile, as the Eberts were driving, they approached a four-way intersection, stopped at the flashing red lights and proceeded down the street. Spence failed to stop at the flashing lights and collided with the Ebert vehicle. At the time of the accident, Spence had a blood alcohol level of 0.195%. Earlier that night, Spence had been removed from Big Daddy’s.
The Eberts filed a lawsuit against Big Daddy’s, claiming that the company violated Indiana’s Dram Shop Act, by serving Spence alcohol when it knew or should have known of his inebriation. The suit also named Big Daddy’s, Little Daddy’s, and owner Daniel Parks, (the Parks defendants) accusing them of (a) continuing to serve Spence alcohol when they knew, or should have known, he was inebriated and impaired; (b) allowing Spence to drive his vehicle from Big Daddy’s when they knew, or should have known, he was inebriated and impaired; (c) failing to notify law enforcement that Spence left Big Daddy’s and operated his vehicle in an inebriated state; and (d) failing to obtain alternative transportation for Spence to prevent him from operating his vehicle.
Illinois Casualty provided separate and identical businessowners and liquor liability policies to Big and Little Daddy’s. Each of those four policies were effective on the night of the accident. Illinois Casualty agreed to defend the Parks defendants. Illinois Casualty later filed a separate declaratory action seeking a judgment that it did not owe a duty to defend or indemnify the Parks defendants in the lawsuit, relying on language in the businessowners policies excluding coverage for claims of bodily injury for which an insured may be liable by reason of causing or contributing to the intoxication of any person or furnishing alcoholic beverages to a person under the influence of alcohol. Illinois Casualty argued that Big Daddy’s liquor liability policy was the only potential source of indemnification.
Illinois Casualty moved for summary judgment, arguing that the insurer did not owe the Parks defendants “any duty to defend or duty to indemnify with respect to the underlying lawsuit” under the liquor liability policy issued to Little Daddy’s and the businessowners policies for both clubs. The trial court granted that motion in favor of the insurer but found that Illinois Casualty did owe a duty to defend or indemnify the Parks defendants under the Big Daddy liquor liability policy.
The defendants appealed, and the Court of Appeals concluded that “the trial court erroneously interpreted the insurance contracts at issue,” and the businessowners policies imposed a contractual duty on Illinois Casualty to defend the clubs.
In holding that the “efficient and predominant cause” of the bar’s liability was “causing or contributing to the intoxication of any person or furnishing alcoholic beverages to a person under the influence of alcohol,” the court ruled that allegations that the bar failed to call the police and negligently failed to intervene to prevent the inebriated Spence from driving away were “inextricably intertwined” with his having been allowed to get drunk, and were therefore excluded.
Editor’s note:
The court found that the efficient and predominant cause of the Eberts’ injuries was drunk driving precipitated by the negligent service of alcohol, and because the insurance policy excluded coverage for claims of bodily injury after causing or contributing to a person’s intoxication or furnishing alcohol to a person under the influence of alcohol, the policy excludes the Eberts’ claims from its coverage. Efficient proximate cause states that when there are two causes of loss to an event, one excluded and one covered, that if the proximate cause of the loss is the covered cause that the loss will be covered. Two states, California and North Dakota, have codified efficient proximate cause into statute. A chart of cases can be found here.