I admit it, I admit it – I’m addicted to the TV show “Bar Rescue.” (When my daughter was about 12 years old, and my wife was out shopping for the day, we once binge-watched about six hours straight, which probably could get me into trouble with the child welfare authorities.) The idea of the show is pretty simple. The host (Jon Tapper) is a consultant in the proper and profitable operation of bars and taverns. He finds establishments that aren’t being run particularly well, and helps fix them through tough love. It’s a very interesting show for people who run their own businesses, because we can see many mistakes that all business owners make (and hopefully avoid them). (And it’s also convinced me that I would never own a bar or restaurant. Too much trouble and stress. Running a law firm is difficult enough.)
One thing that all businesses (not just bars) have to worry about is premises liability. We recently handled the insurance coverage aspects of a very tragic case in which a waitress was shot by an ex-boyfriend in the parking lot of her restaurant-employer. The insurance coverage questions were complex, and involved the interplay of general liability, workers compensation and EPLI coverage. And another New Jersey trial court has just dealt with similar issues in a written decision. The case is Webster v. Palladium Associates, LLC (Superior Court of New Jersey, Law Division, Essex County).
In the Webster case, during a concert at a nightclub, a customer was shot and killed, and another was injured, by an unknown assailant. The plaintiffs (including the estate of the man who was killed) brought suit alleging that the owner of the property, and the tenant who ran the nightclub, were negligent in failing to provide adequate security. Two insurance policies were involved. First, the general liability policy for the property owner (48 Branford). Second, the general liability policy for the tenant (Palladium). The carriers for both entities disclaimed coverage based upon “assault and battery” exclusions. The decision shows pretty clearly how minor variations in policy language can lead to very different results.
USLI sold the general liability coverage to Palladium. The “assault and battery” exclusion in the USLI policy applied to, among other things, “assault” or “battery” arising out of “hiring, placement, employment, training, supervision or retention of a person for whom any insured is or ever was legally responsible.”
The Court had no problem finding that USLI’s exclusion negated coverage “because the operative facts of the complaints constitute an assault and battery [and] the plain language of USLI’s policy excludes coverage for the claims brought against the Third-Party Plaintiffs.”
Executive Risk sold the general liability coverage to the landlord, 48 Branford. Unlike the USLI exclusion, Executive Risk’s “assault and battery” exclusion did not expressly exclude claims for “hiring, placement, employment, training, supervision or retention of a person for whom any insured is or ever was legally responsible.” The Court therefore found that the exclusion was ambiguous and inapplicable, writing: “There is no clear indication to the average reader that claims of negligent hiring, supervision, retention or inadequate crowd control would be excluded under the assault and battery exclusion.…The court finds that allegations of negligence in the complaint allege a risk that is covered under the policy, giving rise to a duty to defend.” (Emphasis added.)
I know that rulings like this one drive my friends in the insurance industry (to the extent I have any friends in the insurance industry) nuts. And yes, in deference to them, it’s possible that the judge simply didn’t want to leave the injured parties with no recourse. But it’s important to remember that policyholders are supposed to get the benefit of the doubt. If there’s more than one version of a particular type of exclusion, and the wording in one version is “looser” than the wording in other versions, it’s not that hard for a Court to find that ambiguity exists.
But an ounce of prevention is worth a pound of cure. It’s important to assess your major risks and consider them in connection with the policy form before a claim happens.
You can read the full Webster decision here.