Bar Negligent for not Seeking Arrest of Drunk & Disorderly Customer

?It is axiomatic among plaintiffs’ personal injury lawyers that the more serious the injury the less the need for legal niceties. In a case of the wrongful death of a young woman at the hands of a violent, intoxicated and unlicensed driver a clear and unambiguous exclusion is insufficient to avoid liability when a trial court finds liability for the bar distinct from the service, use, or removal of an intoxicated patron.

In Mesa Underwriters Specialty Insurance Co. v. Secret’s Gentleman’s Club; Glmr, Inc., Dba Secret’s; Sharon Snyder, Individually And As Administratrix Of The Estate Of Deceased Desiree Snyder; Terry Snyder, No. 17-3779, United States Court Of Appeals For The Sixth Circuit (October 16, 2018) refused to protect the insurer who refused to defend or indemnify the bar.

Mesa Underwriters Specialty Insurance Co. (Mesa) appealed the district court’s grant of partial summary judgment in favor of Defendants Secret’s Gentleman’s Club and GLMR, Inc. (together Secret’s), and Sharon and Terry Snyder (the Snyders), and the district court’s denial of Mesa’s motion for judgment on the pleadings.

FACTS

On April 5, 2014, twenty-two year old Desiree Snyder was killed when the vehicle she was a passenger in was struck head-on by a vehicle driven by Julio Vargas who, heavily intoxicated, was driving the wrong way on I-480. Minutes before the head-on collision, Defendant Secret’s, an adult entertainment bar in Cleveland, had ordered Vargas to leave its establishment.

At the time, Mesa insured Secret’s under a Commercial General Liability Coverage policy that afforded liability coverage for “bodily injury” (defined to include death) caused by an “occurrence” (defined as an “accident”). As pertinent here, the policy contained a liquor liability exclusion, which excluded coverage for:

“Bodily injury” or “property damage” for which any insured may be held liable by reason of:

• causing or contributing to the intoxication of any person;

• the furnishing of alcoholic beverages to a person under the legal drinking age or under the influence of alcohol; or

• any statute, ordinance or regulation relating to the sale, gift, distribution or use of alcoholic beverages.

State-Court Action

Desiree’s parents sued. alleging claims of common-law negligence, wrongful death, conscious disregard/willful and wanton misconduct, survivorship, loss of consortium, and violations of Ohio’s Dram Shop Act by Gigi’s Lounge and Secret’s.

After receiving notice of the state-court action, Mesa notified Secret’s by letter dated February 25, 2015, that it would not defend or indemnify Secret’s against what it termed a “liquor liability” claim.

The Snyders and Secret’s executed a Confidential Agreement and Stipulation for Consent Judgment. The case went forward against Secret’s and GLMR. Secret’s and the Snyders entered into an Amended Stipulation for Consent Judgment allowing Secret’s to continue to deny liability and allowing the state court to determine Secret’s liability and damages, if any, for the Snyders’ common-law negligence, wrongful death, and survivorship claims.

The state trial court found, among other things:

• The toxicological evidence shows that Julio Vargas’ blood alcohol content (BAC) at the time of the crash was likely .263 to .265-well over three times the legal limit.

• The Court’s determination of Secrets’ liability is not premised on its selling or furnishing of alcoholic beverages to Mr. Vargas or on a statutory violation of Ohio’s Dram Shop statute, R.C. § 4399.18. Instead, and pursuant to the parties’ Stipulation, this Court’s sole focus is on Secrets’ alleged common law negligence based on the unique and case-specific facts and attendant circumstances.

• As of April 5, 2014, Julio Vargas did not have a valid driver’s license.

• Vargas was drinking almost continuously on the night of the accident.

CONCLUSIONS OF LAW

The trial court concluded that the Plaintiffs’ common law negligence claims were sufficiently distinct, separate and independent from a statutory cause of action premised on the sale or service of alcohol. Secrets was negligent in failing to inform the Cleveland Police Officer working on its premises of Julio Vargas’ noticeably and extremely intoxicated condition, of his assault of a club dancer in violation of Ohio law, and of his unauthorized use of a woman’s credit card that was clearly not his own. It also includes Secrets’ negligence in failing to take any action whatsoever to prevent Vargas from driving, despite the foreseeable consequences of its inaction in these regards, along with its negligence in instead choosing to personally escort Vargas out of the club to ensure that he would drive away in the extremely intoxicated condition he was in.

Secrets had a common law duty to use reasonable care to prevent foreseeable harm to others, including to Desiree Snyder. This includes Secrets’ duty to call or involve the police (recognizing that an off duty police officer worked at Secrets) to prevent patrons who are known to be noticeably intoxicated from driving, or to, at a minimum, provide them with a ride or call them a taxi. Secrets breached its common law duty of reasonable or due care. The trial Court further held that Secrets’ negligent acts and omissions are a proximate cause of Desiree Snyder’s conscious pain and suffering and wrongful death.

Vargas was more than merely intoxicated. He was over three times the legal limit, had just criminally assaulted a dancer and was, contrary to Secrets’ own rules, trying to use a credit card that was clearly not his own.

Had Secrets notified Officer Butler (who was on scene) of Vargas’ extremely intoxicated condition, Vargas wouldn’t have driven anywhere.

When, as here, the case-specific facts and attendant circumstances show independent acts or omissions of negligence that are separate, distinct and independent from the sale or service of alcohol, Ohio Courts have permitted common law negligence actions to be maintained against the establishment.

Secrets’ negligence claims in this case are separate, distinct and independent from any statutory claim involving or arising from its sale or service of alcohol. While Mesa may disagree with the State Court’s determination that Secrets is liable for common law negligence-separate, distinct and independent from anything having to do with the sale or service of alcohol-the doctrine of collateral estoppel precludes Mesa from attempting to relitigate Secrets’ liability in the Sixth Circuit Court of Appeal.

The district court determined that under the insurance-policy language Mesa had a duty to indemnify Secret’s. Regarding Mesa’s duty to defend, the district court concluded that because the Snyders’ common-law negligence claims were not “indisputably outside the contracted policy coverage” and could arguably have been covered under the Policy, Mesa’s duty to defend was triggered.

Under Ohio law, an insurer’s duty to defend arises when a complaint alleges claims that arguably could be covered under the insurance policy. An insurer has an absolute duty to defend an action when the complaint contains an allegation in any one of its claims that could arguably be covered by the insurance policy, even in part and even if the allegations are groundless, false, or fraudulent. Mesa does not contend that there is no coverage under the policy’s statement of coverage; rather, it argues that coverage is excluded by the liquor liability exclusion.

The district court correctly noted that the Snyders’ allegations “contemplate action or inaction on the part of Secrets’ employees which would arguably amount to negligence whether or not Mr. Vargas was sold or consumed any alcohol at Secrets.” And, as the district court observed, “even if [Mesa’s] initial review of the Complaint did not convince Mesa of its duty to defend Secrets, Mesa was contacted repeatedly by Secrets’ Counsel regarding the fact that allegations of common-law negligence-separate and distinct from causing or contributing to Mr. Vargas’s intoxication or the sale or service of alcohol-were being asserted.”

Although Mesa insists that Secret’s liability is premised on “contributing to the intoxication of Vargas,” this is contrary to the state court’s decision and analysis. Because Mesa presents no argument undermining the district court’s analysis of the policy language, the district court’s determination that Mesa has a duty to indemnify Secrets was affirmed.

ZALMA OPINION

The plaintiffs’ lawyers were brilliant when faced with judgment proof defendants to withdraw the dram shop cause of action and limit their allegations to common law negligence to dip into the assets of the insurer, Mesa. To me, had Vargas been stone cold sober, a boor, and a licensed driver the accident would not have happened. What caused him to drive on the wrong side of the road and hit the decedent head on was due to his intoxication. The court should have considered reality rather than the limitations on the analysis caused by the plaintiffs’ lawyers.[IA]

A Clear and Unambiguous Exclusion Can’t Beat a Great Lawyer

Barry Zalma