Essex Insurance Company v. Way Jose Enterprises LLC et al

Filing 41

ORDER granting 33 and 35 plaintiff's motion for summary judgment...see order for specifics. Signed by Honorable Joe Heaton on 09/30/2013. (lam)

IN THE UNITED STATES DISTRICT COURT FOR THE
WESTERN DISTRICT OF OKLAHOMA
ESSEX INSURANCE COMPANY,
Plaintiff,
vs.
WAY JOSE ENTERPRISES, LLC,
d/b/a THE COLLEGE BAR,
JENNIFER LAWMASTER,
and MATHEW MacALLISTER,
Defendants.

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NO. CIV-13-0233-HE

ORDER
Essex Insurance Company (“Essex”) filed this declaratory judgment action against
Way Jose Enterprises d/b/a The College Bar, Jennifer Lawmaster, and Mathew MacAllister,
seeking a declaration of its obligations under an insurance policy it issued to Way Jose
Enterprises (“TCB” hereafter). The dispute arises out of a state court lawsuit filed by
Lawmaster against MacAllister and TCB to recover for injuries she allegedly sustained as
the result of MacAllister and TCB’s tortious acts. Essex is defending TCB in the state case
under a reservation of rights, but seeks here a determination that it is not obligated to defend
or indemnify TCB in that case. Essex argues any potential liability of TCB in the state case
is outside the scope of the policy coverage, because of various definitions and exclusions in
the policy.
Essex has moved for summary judgment, which is appropriate only “if the movant
shows that there is no genuine dispute as to any material fact and the movant is entitled to

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judgment as a matter of law.” Fed. R. Civ. P. 56(a). “A fact is ‘material’ if, under the
governing law, it could have an effect on the outcome of the lawsuit. A dispute over a
material fact is ‘genuine’ if a rational jury could find in favor of the nonmoving party on the
evidence presented.” Tabor v. Hilti, Inc., 703 F.3d 1206, 1215 (10th Cir. 2013). The Court
has viewed the evidence and any reasonable inferences that might be drawn from it in the
light most favorable to defendants, the nonmoving parties, and concludes that plaintiff’s
motion should be granted.1
Background
The underlying state lawsuit arises out of an incident that occurred in Stillwater,
Oklahoma in October 2011.

According to the state court petition, Lawmaster and

MacAllister celebrated homecoming at TCB, a restaurant and bar located in Stillwater. They
consumed alcohol to the extent that both were noticeably intoxicated by the evening of
October 29 (petition [Doc. #1-1], paras. 15, 16 & 19). The petition alleges that, at some point
in the evening, Lawmaster was drugged. It further alleges that, during the early morning
hours of October 30, Lawmaster and MacAllister left TCB. The petition alleges that the
drugging of Lawmaster caused her to lose consciousness and the ability to remember the
events that happened after she left TCB. However, the petition alleges she was later found
“abandoned, assaulted, and horrifically injured.” (petition, para. 25). The petition alleges

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Defendants Lawmaster and MacAllister each filed a response to Essex’s initial
complaint, [Doc. Nos. 19, 22], but neither party filed a response to Essex’s motion for summary
judgment.
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that she was either assaulted by MacAllister, or abandoned by MacAllister and sustained
injuries from an unidentified source. Lawmaster alleges TCB breached a number of duties
owed to her, including to provide for her safety, to police and prevent activities which would
lead to an unreasonable risk of harm, to come to the aid of patrons, and to train the
employees in regard to serving alcohol to intoxicated individuals. Essex contends that the
insurance policy does not cover any of these potential theories or sources of liability.
The existence and language of the policy are not disputed, nor is there is there any
dispute that the policy was in force at the time of the incident alleged in the state case. Essex
relies on four coverage and exclusion provisions here. It argues that the policy covered only
accidental, rather than intentional, acts. It relies on specific exclusions directed to injuries
arising out of assault and battery and of liquor liability. Finally, it argues the policy does not
provide coverage for punitive damages.
Analysis
The question in this case is whether, under the terms of the insurance policy, Essex
has a duty to defend or indemnify TCB. Oklahoma law applies.2
The pertinent legal principles are well established. Under Oklahoma law, insurance
contracts are interpreted “in accordance with principles applicable to all contracts.” Mansur
v. PFL Life Ins. Co.,589 F.3d 1315, 1319 (10th Cir. 2009). The contract is “construed
according to the plain meaning of its language,” and, if unambiguous, the court “interprets

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Both parties treat the various legal issues as ones of Oklahoma law.
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the contract as a matter of law.” Id. “When an insurance contract is susceptible of two
meanings . . . words of inclusion are liberally construed in favor of the insured and words of
exclusion strictly construed against the insurer.” Phillips v. Estate of Greenfield, 859 P.2d
1101, 1104 (Okla. 1993). “I[t] is the expectations of the insured that control” when “the
terms of the contract are unclear, or when the contract is susceptible to two reasonable
interpretations.” Western World Ins. Co. v. Markel American Ins. Co., 677 F.3d 1266, 1271
(10th Cir. 2012); accord Mansur, 589 F.3d at 1319 (Because “[a]n insurance policy is
considered a contract of adhesion in Oklahoma,” if the contract is ambiguous, it is “construed
in favor of the insured.”).
An insurer’s obligation under a liability policy “generally contains two basic duties
— the duty to defend and the duty to indemnify its insured.” First Bank of Turley v. Fid. &
Deposit Ins. Co. of Md., 928 P.2d 298, 302-03 (Okla.1996). The insurer’s duty to defend is
broader than the duty to indemnify, and arises whenever the insurer “ascertains the presence
of facts that give rise to the potential of liability under the policy.” Id. at 303 (footnote
omitted). “[T]here need not be a probability of recovery.” Id. at 303 n.14. “[T]he insurer’s
duty to defend its insured arises whenever the allegations in a complaint state a cause of
action that gives rise to the possibility of a recovery under the policy.” Id.
The liability provisions of the TCB policy obligate Essex to “pay those sums that the
insured becomes legally obligated to pay as damages because of ‘personal and advertising
injury’ to which this insurance applies,” and “to defend the insured against any ‘suit’ seeking
those damages.” [Doc. #1-2, p. 21]. There is also coverage for “bodily injury” if it occurs
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during the policy period and is caused by an “‘occurrence’ which takes place in the ‘coverage
territory.’” Id. at 16. “‘Occurrence’ means an accident, including continuous or repeated
exposure to substantially the same general harmful conditions.” Id. at 29.
Essex argues that, as coverage is confined to injuries caused by an “accident”, it
cannot be liable for the injuries alleged by Lawmaster. It views those injuries as all due to
the intentional acts of MacAllister. Further, Essex argues the exclusion for injuries arising
out of assault and battery similarly bars liability to TCB,3 in light of the allegations that
MacAllister assaulted Lawmaster. TCB essentially concedes Essex’s argument to the extent
Lawmaster’s injuries were due to any assault and battery, or other intentional tort, committed
by MacAllister.4 Rather, it argues that Lawmaster’s state claims include alternative ones
based on MacAllister’s alleged negligence in abandoning Lawmaster after they left the bar,
i.e. his negligence in failing to protect Lawmaster from whatever other unspecified person
or source caused her injuries. TCB then argues Lawmaster’s claims against it (TCB)
potentially include ones that it was negligent for not protecting her from MacAllister’s
negligence — described as failure to police the premises, failure to take reasonable steps to
protect her, and failure to come to her aid.
That theory strikes the court as a bit of a heavy lift. However, the likelihood of
3

Under the assault and battery endorsement, coverage is excluded for bodily injury
“arising out of assault and/or battery, or out of any act or omission in connection with the
prevention or suppression of such acts, whether caused by or at the instigation or direction of
any insured, insured’s “employees”, patrons or any other person.” [Doc #35-2, p. 39].
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TCB did not respond to plaintiff’s argument as to punitive damages being excluded
under the policy, thereby conceding that issue as well.
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Lawmaster establishing liability in the state case on that theory is not the question here, but
rather whether there is potential liability that the Essex policy covers. Notwithstanding that
distinction, though, the court concludes the policy terms, in particular the liquor exclusion,
preclude liability even for negligence-based torts.
The liquor liability exclusion [Doc. #35-2, p. 40] provides, in pertinent part:
The coverage under this policy does not apply to “bodily injury” . . . or any
injury loss or damage arising out of:
...
4.) Any act or omission by an any insured, any employee of any
insured, patrons, members, associates, volunteers or any other
persons respects providing or failing to provide transportation,
detaining or failing to detain any person, or any act of assuming
or not assuming responsibility for the well being, supervision or
care of any person allegedly under or suspected to be under the
influence of alcohol.
This exclusion applies to the entire policy. (Emphasis added.)
Here, there is no dispute that Lawmaster was under the influence of alcohol.5 Her
petition explicitly alleges that. She may also have been, as she alleged, under the influence
of other drugs as well, but that does not affect the undisputed fact that she was, and was
suspected to be, intoxicated by alcohol. Under the express terms of the liquor exclusion
highlighted above, there can be no liability under the policy — once “under the influence of
alcohol” is shown — for not caring for her, or supervising her, or any other act of “assuming
5

Petition, para. 19 [Doc. #1-1, p. 3]: “Lawmaster continued to consume alcoholic
beverages that were purchased by MacAllister from [TCB] despite the actions that she and
MacAllister displayed and despite their obvious intoxication.” (Emphasis added.) The other
“actions displayed” included dancing together on the stage and making “a scene.” Para. 18.
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or not assuming responsibility” for her. The exclusion extends both to omissions or failures
to act by TCB and its employees and to those of MacAllister (a “patron” of the bar). The
exclusion thus precludes liability based on any theory of TCB being liable for negligent acts
of MacAllister.
The circumstances here are different from those involved in various of the cases
relied on by TCB. This is not a situation where the insurer’s liability will be determined
by whether alcohol sold by it contributed to the tortious acts committed by MacAllister or
otherwise contributed to or caused the injuries to Lawmaster. It is also does not matter
whether MacAllister’s conduct did or did not constitute a supervening cause. Rather, the
referenced portion of the exclusion turns on Lawmaster’s condition — was she under the
influence of alcohol or not? If she was, there is no coverage. In the circumstances
existing here, that fact is undisputed. It is not a factual issue yet to be resolved in the state
proceeding or otherwise a variable.
In sum, either because of (1) definitions/exclusions excluding liability for TCB
exposure based on MacAllister’s intentional torts or (2) because of the liquor exclusions
impact on potential TCB liability due to its or MacAllister’s negligence, Essex is entitled
to a declaration that it is not obligated to defend or indemnify TCB in connection with
Ms. Lawmaster’s claims.
Plaintiff’s motion for summary judgment [Doc. Nos. 33 & 35] is GRANTED.

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IT IS SO ORDERED
Dated this 30th day of September, 2013.

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