TRANSPORTATION INSURANCE COMPANY et al v. HEATHLAND HOSPITALITY GROUP, LLC et al
MEMORANDUM AND/OR OPINION. SIGNED BY HONORABLE NITZA I QUINONES ALEJANDRO ON 11/20/17. 11/21/17 ENTERED AND COPIES E-MAILED.(kw, )
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
COMPANY, et al.
HEATHLAND HOSPITALITY GROUP,
LLC, et al.
NITZA I. QUIÑONES ALEJANDRO, J.
NOVEMBER 20, 2017
This is a declaratory judgment action brought by an insurer under the Declaratory
Judgment Act, 28 U.S.C. §§ 2201-2202, to determine the rights and duties, if any, owed with
respect to insurance coverage for the defense and/or indemnification of its insured in two settled
underlying state court actions. Presently, before this Court are cross-motions for summary
judgment filed by Plaintiffs Transportation Insurance Company and Continental Casualty
Company (collectively, “CNA”) and Defendants Heathland Hospitality Group, LLC, Heathland
Hospitality Group, LP, and Judith M. Serratore, individually and as Administratrix of the Estate
of Frank J. Serratore1 (collectively “Heathland”), in which each party seeks a declaration in its
favor with respect to CNA’s obligation to defend and indemnify Heathland. The issues argued in
these cross-motions have been fully briefed by the parties and are ripe for disposition. For the
Defendant Judith M. Serratore (“Serratore”) was added by way of an amended complaint because
Heathland purportedly assigned all of its rights to insurance proceeds at issue to Serratore as part of its
settlement of the underlying state court litigation with Heathland. As Heathland’s purported assignee,
Serratore has essentially stepped into the shoes of Heathland for purposes of this declaratory judgment
reasons stated herein, CNA’s motion is granted, and Heathland’s motion is denied.
Consequently, summary judgment will be entered in favor of CNA.2
This matter originated on August 12, 2015, with CNA’s filing of a complaint against
Defendants Heathland Hospitality Group, LLC, and Heathland Hospitality Group, LP, seeking
declaratory judgment and a determination of the rights and duties, if any, it owed Heathland with
respect to insurance coverage for the defense and/or indemnification of Heathland in the two
underlying state court actions (collectively, the “State Court Litigation”) brought by Judith M.
Serratore, individually and as Administratrix of the Estate of Frank J. Serratore. [ECF 1]. On
July 18, 2016, CNA filed an amended complaint, [ECF 23], to include, as additional defendants,
Judith M. Serratore, individually and as Administratrix of the Estate of Frank Serratore because,
purportedly, Heathland had assigned to Serratore all of its rights with respect to any insurance
proceeds under the CNA policies at issue.
Heathland sought a defense and indemnification from CNA for the State Court Litigation
pursuant to the two insurance policies that CNA had issued to Heathland; to wit:
A commercial general liability policy that Transportation Insurance
Company issued to Heathland for the policy period of July 18, 2008 – July 18,
While this Memorandum Opinion adjudicates both of the cross-motions for summary judgment,
separate Orders shall be issued with respect to each party’s motion.
In reviewing a motion for summary judgment, the Court must “consider all evidence in the light
most favorable to the party opposing the motion.” A.W. v. Jersey City Publ. Schs., 486 F.3d 791, 974 (3d
Cir. 2007). Because an insurer’s duty to defend an action against its insured is initially determined on the
basis of the allegations contained in the underlying complaint against the insured, most of the facts set
forth in this section are drawn from the underlying state court complaints filed against Heathland. See
State Farm Fire & Cas. Co. v. Estate of Mehlman, 589 F.3d 105, 108 n.3 (3d Cir. 2009) (citing Donegal
Mut. Ins. Co. v. Baumhammers, 938 A.2d 286, 290-92 (Pa. 2007)). However, some facts in this section
are drawn from the parties’ respective statements of undisputed facts and responses thereto. While most
of the facts material to the parties’ cross-motions are undisputed, where disputed, this Court has construed
the facts in favor of Heathland.
2009, under policy number 20987915471, and subject to a $1,000,000 per
occurrence limit of liability (the “General Liability Policy”). (See Pl.’s Statement
of Undisputed Facts (“SOF”), ECF 158-2, at ¶1); and
A commercial umbrella policy that Continental Casualty Company issued
to Heathland for the policy period of July 18, 2008 – July 18, 2009, under policy
number 2097915938, and subject to a $5,000,000 per occurrence limit of liability
(the “Umbrella Policy”). (Id. at ¶2).
Relevant to our discussion, the General Liability Policy contains a “Liquor Liability”
exclusion which provides, in part:
This insurance does not apply to . . . “[b]odily injury” . . . 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.
This exclusion applies only if you are in the business of manufacturing,
distributing, selling, serving or furnishing alcoholic beverages.
(Id. at ¶4).
Similarly, the Umbrella Policy contains a “Liquor Liability Limitation,” which provides:
This insurance does not apply to . . . “[b]odily injury” . . . for which an
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;
Unless, and then only to the extent that coverage is provided by
“scheduled underlying insurance.”4
(Id. at ¶5).
The General Liability Policy also contains a “Professional Services” exclusion, which
provides, in part:
This insurance does not apply to . . . “[b]odily injury” . . . caused by the
rendering or failure to render any professional service . . .
(Id. at ¶6).
On November 10, 2010, Judith M. Serratore, individually and as the Administratrix of the
Estate of Frank J. Serratore, filed a lawsuit in the Court of Common Pleas of Philadelphia
County captioned Serratore v. Woodbury Country Club, Nov. Term 2010, Civ. A. No. 1830, (the
“PA Serratore Litigation”). (Id. at ¶8). Five days later, Ms. Serratore filed an identical civil
action in the Superior Court of New Jersey, Gloucester County, captioned Serratore v. Woodbury
Country Club, GLO-L-1985-10, (the “NJ Serratore Litigation”).5 (Id. at ¶9). The complaints in
both the PA Serratore Litigation and the NJ Serratore Litigation (collectively, the “State Court
Complaints”) named as party defendants Heathland, Michael Whittingham (“Whittingham”), and
the Woodbury Country Club. (Id. at ¶10). Both of the State Court Complaints asserted claims
against Heathland for violation of “47 P.S. § 4-492 et seq., and other Dram Shop statutes” (Count
III) and common law negligence (Count IV). (Id. at ¶11). On January 18, 2011, Serratore filed
an Amended Complaint in the PA Serratore Litigation, (id. at ¶12), which dropped Count III of
the PA Complaint. (Id. at ¶13).
In the State Court Complaints, Serratore alleged, inter alia, the following material facts:
The General Liability Policy is one of the insurance policies defined in the Umbrella Policy as
“scheduled underlying insurance.”
According to Heathland, the NJ Serratore Litigation was commenced as a savings action pending
the preliminary objections and motions filed in the PA Serratore Litigation.
that her husband, Frank J. Serratore, was fatally injured on November 16, 2008,
when the motor vehicle that he was operating was struck by another vehicle
operated by Whittingham, who was intoxicated at the time of the accident.
(CNA Ex. 3 at ¶¶10, 11; CNA Ex. 4 at ¶¶10, 11; CNA Ex. 5 at ¶¶11, 12);
that Whittingham became intoxicated, and was sold and served alcoholic
beverages while he was visibly intoxicated by Heathland, at the Woodbury
Country Club. (CNA Ex. 3 at ¶¶8, 9; CNA Ex. 4 at ¶¶8, 9; CNA Ex. 5 at ¶¶9,
that on November 16, 2008, the Woodbury Country Club “was a business
establishment that sold alcoholic beverages.” (CNA Ex. 3 at ¶6; CNA Ex. 4 at
¶6; CNA Ex. 5 at ¶7);
that “at all times relevant,” Heathland “provided management, training,
supervision and other services to and for Woodbury Country Club including
food and beverage sales and services.” (CNA Ex. 3 at ¶7; CNA Ex. 4 at ¶7;
CNA Ex. 5 at ¶8); and
that Heathland was responsible for Whittingham’s intoxication and Frank
Serratore’s resulting death because: (1) Heathland served or permitted
Whittingham to be served alcoholic beverages, including when he was visibly
intoxicated; (2) Heathland failed to institute and enforce proper policies and
procedures governing the sale and service of alcoholic beverages at the
Woodbury Country Club; and/or (3) Heathland failed to properly train and
supervise Woodbury Country Club employees with respect to the sale and
service of alcoholic beverages. (CNA Ex. 3 at ¶¶27-38; CNA Ex. 4 at ¶¶34-38;
CNA Ex. 5 at ¶¶28-38).
Heathland sought a defense and indemnification from CNA for the State Court Litigation.
By letter dated November 29, 2010, CNA disclaimed coverage for the State Court Litigation
relying on the Liquor Liability exclusions in the CNA policies, (SOF at ¶21), and indicated that
CNA “fully reserve and retain all rights that they have under the terms of the policies and under
the law,” and that CNA’s evaluation was “not intended to be exhaustive, and there may be other
terms and conditions” that apply. (Id. at ¶22).
In December 2010, Heathland retained the law firm of Yost & Tretta, LLP, to represent it
with respect to, inter alia, CNA’s denial of coverage. (Id. at ¶25). Through its insurance broker
and its legal counsel, Heathland conveyed to CNA in December 2010, January 2011, and April
2011, that Heathland disagreed with CNA’s decision to deny coverage for the State Court
Litigation. (Id. at ¶26). In January and April 2011, Heathland’s counsel threatened to sue CNA
over CNA’s decision to deny coverage. (Id. at ¶27). On January 24, 2011, Heathland’s counsel
sent CNA a copy of Serratore’s Amended Complaint in the PA Serratore Litigation and again
demanded that CNA assume Heathland’s defense and indemnification. (Id. at ¶28). On January
25, 2011, CNA reaffirmed its denial of coverage for the State Court Litigation. (Id. at ¶29).
Sometime in early July 2011, Heathland and Serratore reached an agreement to settle
Serratore’s claims against Heathland in the State Court Litigation. (Id. at ¶33). Heathland’s
attorney described the terms of Heathland’s agreement with Serratore as follows:
As you know, Tom [Sheridan] and I have reached an agreement in
principle with plaintiff’s counsel, Pansini & Mezrow, to protect
you from personal exposure and lessen the future litigation costs.
We are in the process of working out the details and drafting an
agreement. Essentially, plaintiffs have agreed not to pursue any
action against you personally over and above Heathland’s available
insurance coverage with CNA Insurance Company. In exchange
for the above, we have agreed on you[r] behalf to fully cooperate
with plaintiff’s counsel and assign Heathland’s rights to plaintiffs
to proceed against CNA Insurance Company. As part of the
agreement, we would withdraw our Motion to Dismiss the New
Jersey action, our Motion to Transfer the Philadelphia action to
New Jersey and cooperate fully with plaintiffs against Woodbury.
Finally, we would only participate in proceedings that we are
required to appear at and/or which we determine would be
Consistent with the agreement, on July 8, 2011, Heathland withdrew its pending motion
to dismiss the New Jersey action, and sometime prior to August 31, 2011, withdrew the motion
to transfer pending in the PA Serratore Litigation. (Id.). On or about April 7, 2015, a written
“Confidential Assignment and Covenant of Cooperation” by and between Serratore, Heathland,
Michael Pansini, Esq., Robert Wurtz, Richard Yost, Esq., and Thomas Sheridan, Esq., was fully
executed. (Id. at ¶34). On or about the same day, the same parties executed a “Stipulated
Under the settlement agreement between Heathland and Serratore, Heathland purported
to assign its rights against CNA to Serratore. (Id. at ¶35). As part of the settlement, Heathland
admitted liability to Serratore. (Id. at ¶36). Counsel for Heathland, Attorney Yost, testified
during a deposition that a jury could find Heathland liable to Serratore because Heathland
managed the Woodbury Country Club. (Id.)
On or about July 21, 2015, CNA first learned that Serratore and Heathland had settled the
State Court Litigation when Heathland sent CNA a notice of a “fairness” hearing to be held on
August 10, 2015, in the Philadelphia Court of Common Pleas. (Id. at ¶39). As scheduled, the
“fairness” hearing concerning the Heathland-Serratore settlement was held. (Id. at ¶40). During
the oral argument, Steven Mezrow, counsel for Serratore, advised the court that while Heathland
had requested the hearing, in reality Serratore and Heathland were making a “joint motion” for
approval of the terms of the settlement. (Id. at ¶41). In support of the joint motion, Mezrow
argued, without objection by Heathland, inter alia, that:
Heathland Hospitality Group . . . is a company that provides
management. It provides training. It provides oversight of bars,
restaurants, and the financial aspect of the bar and food aspect of
Heathland Hospitality entered into a partnership agreement with
Defendant Woodbury Country Club to run their bars, to train their
bartenders, and to manage oversight of the bar and the operation of
the bar. What brings us here today is a very tragic incident that
occurred on November 16th, 2008. A defendant by the name of
Michael Whittingham was celebrating his birthday. . . . He got to
the point where unfortunately he was unable to make cognizant
decisions himself, and sadly, the bartender who was managed by
Heathland and employed by Woodbury continued to serve alcohol.
(Id. at ¶42). On August 10, 2015, a judge of the Philadelphia Court of Common Pleas entered an
Order approving the parties’ stipulated judgment. (Heathland Ex. A). CNA commenced this
federal action two days later. [ECF 1].
As stated, in the parties’ respective cross-motions for summary judgment, the parties each
seek judgment and a declaration in their favor with respect to CNA’s duty to defend and/or
indemnify Heathland in the underlying State Court Litigation.
Federal Rule of Civil Procedure (“Rule”) 56 governs the summary judgment motion
Fed. R. Civ. P. 56.
Specifically, this rule provides that summary judgment is
appropriate “if the movant shows that there is no genuine dispute as to any material fact and the
movant is entitled to judgment as a matter of law.” Id. A fact is “material” if proof of its
existence or non-existence might affect the outcome of the litigation, and a dispute is “genuine”
if “the evidence is such that a reasonable jury could return a verdict for the nonmoving party.”
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). Under Rule 56, the court must view
the evidence in the light most favorable to the non-moving party. Galena v. Leone, 638 F.3d
186, 196 (3d Cir. 2011).6
Generally, Rule 56(c) provides that the movant bears the initial burden of informing the court of
the basis for the motion and identifying those portions of the record which the movant “believes
demonstrate the absence of a genuine issue of material fact.” Celotex Corp. v. Catrett, 477 U.S. 317, 323
(1986). This burden can be met by showing that the nonmoving party has “fail[ed] to make a showing
sufficient to establish the existence of an element essential to that party’s case.” Id. at 322. After the
moving party has met its initial burden, summary judgment is appropriate if the nonmoving party fails to
rebut the moving party’s claim by “citing to particular parts of materials in the record, including
depositions, documents, electronically stored information, affidavits or declarations, stipulations . . . ,
admissions, interrogatory answers, or other materials” that show a genuine issue of material fact or by
“showing that the materials cited do not establish the absence or presence of a genuine dispute.” See Rule
56(c)(1)(A-B). The nonmoving party must “do more than simply show that there is some metaphysical
doubt as to the material facts.” Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574,
586 (1986). The nonmoving party may not rely on bare assertions, conclusory allegations or suspicions,
Fireman’s Ins. Co. of Newark v. DuFresne, 676 F.2d 965, 969 (3d Cir. 1982), nor rest on the allegations
The standards to be applied in deciding cross-motions for summary judgment are the
same as those applied when only one party has filed a summary judgment motion. Cincinnati
Ins. Co. v. Devon Intern., Inc., 924 F. Supp. 2d 587, 589 n.3 (E.D. Pa. 2013). “When confronted
with cross-motions for summary judgment, the ‘court must rule on each party’s motion on an
individual and separate basis, determining, for each side, whether a judgment may be entered in
accordance with the Rule 56 standard.’” Anderson v. Franklin Institute, 185 F. Supp. 3d 628, 635
(E.D. Pa. 2016) (quotations omitted).
Here, though the parties’ underlying cross-motions are for summary judgment with
respect to their initial dispute over CNA’s duty to defend, they each rely upon their respective
legal interpretations of the underlying insurance policies and the allegations contained in the
underlying State Court Complaints, rather than on an analysis of facts or evidence. As set forth
more fully below, whether an insurer owes a duty to defend an insured in litigation brought
against the insured is initially determined from a review of the allegations contained in the
underlying complaint against the insured and the language of the insurance policy at issue. See
Mehlman, 589 F.3d at 110 (citing Donegal, 938 A.2d at 290)).
As such, neither the parties’
respective arguments with respect to the duty to defend nor this Court’s opinion with respect to
the duty to defend is reliant upon any disputed facts or evidence.
As noted, in its motion for summary judgment, CNA seeks a declaration that it owes no
duty to defend and/or indemnify Heathland in the State Court Litigation. Heathland, on the other
hand, in its cross-motion for summary judgment, seeks a declaration that CNA does owe it a duty
in the pleadings. Celotex, 477 U.S. at 324. Rather, the nonmoving party must “go beyond the pleadings”
and either by affidavits, depositions, answers to interrogatories, or admissions on file, “designate ‘specific
facts showing that there is a genuine issue for trial.’” Id.
to defend and indemnify in the State Court Litigation. Because the cross-motions for summary
judgment concern identical issues and there are no disputes of material fact, this Court will
address and adjudicate both motions concurrently.
Under Pennsylvania law, 7 an insurer’s duty to defend is broader than its duty to
indemnify. Sikirica v. Nationwide Ins. Co., 416 F.3d 214, 225 (3d Cir. 2005). However, “there
is no duty to indemnify if there is no duty to defend.” Id. To determine whether CNA owes a
duty to defend Heathland in the underlying State Court Litigation, the allegations in the State
Court Complaints and the language of the insurance policies issued to Heathland must be
examined and compared. That is:
an insurer’s duty to defend an action against the insured is
measured, in the first instance, by the allegations in the plaintiff’s
pleadings . . . . In determining the duty to defend, the complaint
claiming damages must be compared to the policy and a
determination made as to whether, if the allegations are sustained,
the insurer would be required to pay [the] resulting judgment . . . .
[T]he language of the policy and the allegations of the complaint
must be construed together to determine the insurers’ obligation.
Donegal, 938 A.2d at 290 (citation omitted).
Thus, to determine whether a claim is covered by an insurance policy, the court must
compare the four corners of the policy to the four corners of the underlying complaint. Id. If the
underlying state court complaint alleges an injury “which may be within the scope of the policy,
the company must defend the insured until the insurer can confine the claim to a recovery that
the policy does not cover.” United Servs. Auto. Ass’n v. Elitzky, 517 A.2d 982, 985 (Pa. Super.
This matter comes before this Court on diversity jurisdiction, and all parties agree that
Pennsylvania substantive law governs the action. Accordingly, this Court will treat the decisions of the
Pennsylvania Supreme Court as binding precedent and will treat the decisions of the Pennsylvania
Superior Court as persuasive precedent. State Farm Fire & Cas. Co. v. Estate of Mehlman, 589 F.3d 105,
108 n. 2 (3d Cir. 2009) (citing Jewelcor Inc. v. Karfunkel, 517 F.3d 672, 676 n. 4 (3d Cir. 2008)).
Ct. 1986). “To prevent artful pleading designed to avoid policy exclusions, it is necessary to
look at the factual allegations in the complaint, and not how the underlying plaintiff frames the
request for relief.” Mut. Benefit Ins. Co. v. Haver, 725 A.2d 743, 745 (Pa. 1999). The mere
allegation of “negligence” in a complaint is insufficient to trigger an insurer’s duty to defend.
See id. (“[T]he particular cause of action that a complainant pleads is not determinative of
whether coverage has been triggered. Instead it is necessary to look at the factual allegations
contained in the complaint.”); Scopel v. Donegal Mut. Ins. Co., 698 A.2d 602, 605 (Pa. Super.
Ct. 1997) (“[I]n focusing attention upon the cause of action pled, [claimants] run afoul of our
case law, which dictates that the factual averments contained in a complaint determine whether
an insurer must defend.”) (emphasis in original). The duty to defend is properly denied where
the allegations fall within a clear and unambiguous exclusion of coverage. Harrison v. Aetna
Life & Casualty, 473 A.2d 636, 636 (Pa. Super. Ct. 1984).
Here, CNA relies on the Liquor Liability exclusion in the policies to argue that it did not
owe a duty to defend Heathland in the State Court Litigation because the facts alleged and the
claims pled in the State Court Complaints fall within said exclusion. Heathland disagrees and
argues that at least some of the claims and/or theories of liability alleged in the underlying State
Court Complaints fall outside of the Liquor Liability exclusions and within the policy’s scope of
In addressing insurance disputes under Pennsylvania law, the Court of Appeals for the
Third Circuit outlined the approach that Pennsylvania district courts should take when reviewing
insurance contract provisions and exclusions such as those at issue here as follows:
It is the function of the court to interpret insurance contracts under
The court’s primary consideration in
performing this function is to ascertain the intent of the parties as
manifested by the language of the written instrument. The policy
must be read as a whole and construed in accordance with the plain
meaning of terms. Words of common usage must be construed in
their natural, plain, and ordinary sense, with a court free to consult
a dictionary to inform its understanding of terms. Where the
language of an insurance policy is clear and unambiguous, a court
must enforce that language. Furthermore, if possible, a court
should interpret the policy so as to avoid ambiguities and give
effect to all of its provisions. However, if the contract’s terms are
reasonably susceptible to more than one interpretation, then they
must be regarded as ambiguous. Ambiguous provisions in an
insurance policy must be construed against the insurer and in favor
of the insured; any reasonable interpretation offered by the insured,
therefore, must control. Pennsylvania courts have applied this rule
Amer. Auto. Ins. Co. v. Murray, 658 F.3d 311, 320-21 (3d Cir. 2011) (citations and quotations
omitted); see also Donegal, 938 A.2d at 290–91; Standard Venetian Blind Co. v. Am. Empire
Ins. Co., 469 A.2d 563, 566 (Pa. 1983). Where “an insurer relies on a policy exclusion as the
basis for its denial of coverage and refusal to defend, the insurer has asserted an affirmative
defense and, accordingly, bears the burden of proving such defense.” Madison Constr. Co. v.
Harleysville Mut. Ins. Co., 735 A.2d 100, 106 (Pa. 1999).
As noted, the parties’ coverage dispute has centered primarily on the insurance policies’
Liquor Liability exclusions. The policy provides that the exclusion applies “only if you are in
the business of manufacturing, distributing, selling, serving or furnishing alcoholic beverages.”
(CNA Ex. 1 at CNA00211-12). Specifically, the Liquor Liability exclusion reads as follows:
“Bodily injury” or “property damage” for which any
insured may be held liable by reason of:
(1) Causing or contributing to the intoxication of any
(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 applies only if you are in the business of
manufacturing, distributing, selling, serving or furnishing
Heathland appears to argue that the Liquor Liability exclusion is ambiguous and that this
Court must, therefore, give it any reasonable interpretation put forth by Heathland. This Court
As outlined above, determining whether a provision of an insurance policy is
ambiguous is a task for the court. Murray, 658 F.3d at 320-21. In undertaking the interpretation
of an insurance policy, this Court must read the policy as a whole and construe it according to
the plain meaning of its terms. Id.; see also Bateman v. Motorists mutual Ins. Co., 590 A.2d 281,
283 (Pa. 1991). An insurance policy provision is ambiguous only if it is “reasonably susceptible
to more than one interpretation.” Murray, 658 F.3d at 321 (citations omitted).
Here, reading the relevant “in the business of” language in the context of the entire policy
and the exclusion, it is clear that the provision is intended to distinguish an insured who
occasionally serves alcohol from an insured who is involved with the service of alcohol with
such regularity that the insured represents a significantly greater insurance risk.
numerous courts, including the Pennsylvania Superior Court, have reviewed identical or nearly
identical liquor liability provisions and found them to not be ambiguous. See, e.g., U.S. Fidelity
and Guar. v. Griggs, 491 A.2d 267, 291 (Pa. Super. Ct. 1985) (holding similar “in the business
of” language contained in a liquor liability exclusion to not be ambiguous); Harleysville
Preferred Ins. Co. v. Executive Banquet and Conference Ctr., 2016 WL 6879524, at *3 (Del.
Super. Ct. Nov. 21, 2016) (same); Peerless Ins. Co. v. Disla, 990 F. Supp. 261, 263 (D. Conn.
1998) (same); Nichols v. Westfield Ins. Co., 509 S.E.2d 149, 150-51 (Ga. App. Ct. 1998)
(collecting cases). This Court is guided by and agrees with these courts, and finds that the
Liquor Liability exclusion and, in particular, the “in the business of” language, is not ambiguous.
Having made this determination of unambiguity, consistent with the principles outlined
above, this Court must now compare the allegations contained within the four corners of the
State Court Complaints to the language of the insurance policies to determine whether the
underlying allegations allege a claim that could potentially fall within the scope of the insurance
coverage. Donegal, 938 A.2d at 290. In the State Court Litigation, Serratore alleged the
following key facts:
the Woodbury Country Club “was a business establishment that sold
alcoholic beverages.” (CNA Ex. 3 at ¶6);
Heathland “provided management, training, supervision and other
services to and for Woodbury Country Club including food and beverage
sales and services.” (Id. at ¶7);
Heathland “by their authorized agents and servants at Woodbury Country
Club, sold or gave alcoholic beverages to Defendant Whittingham who
consumed the beverages on the premises of Defendant Woodbury
Country Club.” (Id. at ¶8);
“Defendant Whittingham became intoxicated and was served alcohol
while visible intoxicated by Defendants Woodbury Country Club, and/or
Heathland Hospitality, their agents or servants.” (Id. at ¶9);
“At all times relevant hereto, all Defendants [including Heathland] were
acting through their respective agents (actual, apparent or ostensible),
servants and/or employees and some or all of the Defendants [including
Heathland] may have been agents, servants and employees of the other
Defendants.” (Id. at ¶12); and,
“Heathland Hospitality, individually and by and through their agents,
servants, workmen, and/or employees, negligently, carelessly and
recklessly served and continued to serve and/or permitted alcoholic
beverages to be served to Defendant Whittingham and/or recklessly failed
to manage the service of alcoholic beverages to club members and
patrons, including Defendant Whittingham, when they knew or had
reason to know that alcoholic beverages were being served to visibly
intoxicated patrons with said Defendants knowing that serving visibly
intoxicated patrons created danger and foreseeable harm to such patrons
and others.” (CNA Ex. 4 at ¶34).
These allegations clearly allege that Heathland, through its own agents and/or as an agent of the
Woodbury Country Club, managed the sale of alcoholic beverages at the Woodbury Country
Club, and sold or gave alcoholic beverages to Whittingham, who was alleged to be visibly
intoxicated at the time and who later caused the death of Frank Serratore.
The parties, however, dispute whether these allegations necessarily trigger the Liquor
Liability exclusion. Heathland argues that they do not because the complaints do not contain any
allegation that Heathland was actually “in the business of” selling or furnishing alcoholic
beverages. In support of its argument, Heathland contends that the State Court Complaints
merely allege that Heathland “managed” the Woodbury Country Club and its liquor business and
that an entity that merely manages a liquor business is not necessarily “in the business of”
selling, serving, and/or furnishing alcoholic beverages. In considering the common usage of the
word “manage,” however, this Court disagrees. Common dictionary definitions of the word,
“manage”, include the following:
“to direct or carry on business or affairs.” Merriam-Webster Dictionary;
“to control and direct . . . to direct or carry on business or affairs.”
Webster’s Third New International Dictionary;
“to control and direct, to administer, to take charge of . . . to carry on the
concerns of a business or establishment.” Black’s Law Dictionary;
“to control or organize someone or something, esp. a business.”
“be in charge of (a business, organization, or undertaking); run.” English
Oxford Dictionary; and
“if you manage an organization, business, or system, or the people who
work in it, you are responsible for controlling them.” Collins Dictionary.
Under these common dictionary definitions and usages of the word “manage,” one who
manages a business directs, controls and/or is in charge of and/or responsible for that business.
Thus, as the entity alleged to had been “managing” the Woodbury Country Club’s bar services,
Heathland was alleged to have directed, controlled and been in charge of and responsible for the
Woodbury Country Club’s bar business. Accordingly, this Court finds such assertions clearly
allege that Heathland was in the business of selling, serving or furnishing alcohol.
In addition, Heathland concedes that the Woodbury Country Club was alleged to be in
the business of selling and/or serving alcohol at the time Whittingham allegedly was served
alcohol. (See Heathland Briefs, ECF 157-1 at pp. 15-16 and ECF 161 at p. 32). Indeed, the State
Court Complaints allege that the Woodbury Country Club “was a business establishment that
sold alcoholic beverages.” (CNA Ex. 3 at ¶6; CNA Ex. 5 at ¶7). The State Court Complaints
also clearly allege that Heathland was acting as the Woodbury Country Club’s agent. (CNA Ex.
3 at ¶12; CNA Ex. 5 at ¶13). Under both the common and legal definitions of agent and agency
principles, therefore, Heathland was alleged to have acted on behalf of the Woodbury Country
Club when Heathland furnished alcohol to Whittingham, and when it continued to serve him
alcohol when he was visibly intoxicated. See Wisler v. Manor Care of Lancaster PA, LLC, 124
A.3d 317, 323 (Pa. Super. Ct. 2015) (“Agency is a relationship whereby the principal manifests
assent that another person (the agent) will act on the principal’s behalf subject to the principal’s
control, and the agent agrees to do so.”). This Court finds that, in so pleading, Serratore alleged
that Heathland was in the business of selling, serving or furnishing alcoholic beverages at the
Woodbury Country Club. As such, the insurance policies’ Liquor Liability exclusions apply, and
CNA owed no duty to defend Heathland in the State Court Litigation.
As noted, Heathland also argues that CNA owed it a duty to defend because not all of the
allegations contained in the State Court Complaints necessarily fall within the scope of the
Liquor Liability exclusions. Heathland posits a number of hypothetical situations where it might
be found liable in the State Court Litigation without a factfinder concluding that it was in the
business of selling, serving or furnishing alcohol.
For example, Heathland points to the
allegations that Heathland was negligent for permitting Whittingham to leave the Woodbury
Country Club with his car keys knowing that he was showing clear signs of intoxication and for
failing to warn Whittingham that he was visibly intoxicated, [see ECF 157-1 at p. 4 n.5], and
argues that a jury could have found it liable based on these allegations without necessarily
finding that it was in the business of selling, serving or furnishing alcoholic beverages.8
A majority of courts that have considered this issue have held that “when considering
whether a liquor liability exclusion applies to a claim of negligence that does not specifically
refer to providing alcohol, the reviewing court must consider whether the claims of negligence
are ‘inextricably intertwined with the negligent provision of alcohol;’ where the claims of
negligence are inextricably intertwined with – or not sufficiently independent of – the provision
of alcohol, the liquor liability exclusion will bar coverage.” State Auto. Mut. Ins.v. Lucchesi,
2012 WL 2009355, at *5 (M.D. Pa. June 5, 2012) (collecting cases), aff’d, 563 F. App’x 186 (3d
Cir. 2014); see also Those Certain Underwriters & Insurers Subscribing to Lloyd’s Policy No.
SP93/7131 v. 6091 Frankford Ave., Inc., 1997 WL 22407, at *3 (E.D. Pa. Jan. 21, 1997)
(rejecting insured’s argument that liquor liability exclusion should only apply to Dram Shop Act
claims, and holding common law negligence claims were barred as well); Hamburg v. 14,00
This Court notes that Heathland appears to have taken a contrary position with respect to the
scope of the negligence claims in its motion to dismiss the NJ State Court Complaint. In particular,
Heathland argued there that “[a]ll allegations against Heathland are based upon the negligent service of
alcohol.” (CNA Ex. 27 at p. p.3).
Siblings, Inc., 1998 WL 559783, at *2 (E.D. Pa. Aug. 28, 1998) (holding claim of “general
negligence” was barred by liquor liability exclusion). In addressing this issue in Lucchesi, the
district court relied on the “overwhelming weight of authority” to hold that “when considering
whether a liquor liability exclusion applies to a claim of negligence that does not specifically
refer to the provision of alcohol, the reviewing court must consider whether the claims of
negligence are ‘inextricably intertwined with the negligent provision of alcohol.’” Lucchesi,
2012 WL 2009355, at *5 (M.D. Pa. June 5, 2012) (citing cases), aff’d, 563 F. App’x 186 (3d Cir.
In Lucchesi, a patron of the insured, Champs Sports Bar and Grill (“Champs”), was
severely injured when he was struck by a car shortly after leaving the establishment. 2012 WL
2009355, at *1. Champs argued that the liquor liability exclusion did not bar coverage because
the injured patron alleged that Champs had been negligent “in permitting him to leave the
premises while visibly intoxicated, failing to administer programs designed to identify and assist
intoxicated patrons, and failing to ensure that he left the establishment with a competent
individual.” Id. at *1. Champs argued that these negligence allegations that were not premised
on the sale or furnishing of alcohol could lead to liability premised upon allegations that fell
outside of the liquor liability exclusion. Id. at *4-5. Rejecting this argument, the district court
explained that under Champs’ theory, “any commercial enterprise – even an enterprise that does
not engage in the sale or distribution of alcohol – would have a legal duty, upon seeing an
intoxicated person enter, to prevent him from leaving the establishment while intoxicated. The
Court can find no support in law for the finding of a duty in such circumstances, and Defendants
can cite none.” Id. at *5-6. The only basis for concluding that the insured owed a duty to the
patron “is as a result of having furnished him with alcohol while he was visibly intoxicated.” Id.
at *6. As such, the court concluded that the plaintiff’s claims of negligence were “inextricably
intertwined with his claims based on the furnishing of alcohol, and they fall under the clear and
unambiguous terms of the liquor liability exclusion.” Id. In addition, the district court noted that
its holding was “in accord with the nearly unanimous consensus of state and federal courts that
have considered whether liquor liability exclusions apply to similarly framed claims of
negligence.” Id. (citing cases).
This Court finds the holding and reasoning in Lucchesi, (affirmed by a non-precedential
opinion of the Third Circuit), persuasive. As in Lucchesi, all of Heathland’s allegedly negligent
acts and/or omissions are inextricably intertwined with the duty of the licensee (the Woodbury
Country Club) and its manager and agent (Heathland) not to serve, sell or furnish alcoholic
beverages to Whittingham when he was visibly intoxicated.
According to Serratore’s
allegations, Heathland encouraged the sale of alcoholic beverages (CNA Ex. 3 at ¶35(l); CNA
Ex. 4, at ¶35(l), (y); CNA Ex. 5 at ¶35(l)), and failed to manage the sale and service
appropriately by implementing proper policies and procedures (CNA Ex. 3 at ¶35(f)-(l), (o)-(q),
(t)-(w); CNA Ex. 4 at ¶35(f)-(l), (n)-(q), (t)-(x); CNA Ex. 5 at ¶35(f)-(l), (o)-(q), (t)-(w)), in
addition to allegedly serving Whittingham when he was visibly intoxicated and, having done so,
then allowing him to drive (CNA Ex. 3 at ¶35(a)-(e), (m)-(n), (r)-(s); CNA Ex. 4 at ¶35(a)-(e),
(m), (r)-(s); CNA Ex. 5 at ¶35 (a)-(e), (m)-(n), (r)-(s)). The only basis for the claims against
Heathland, however, is its alleged service or furnishing of alcohol. Cf., Lucchesi, 2012 WL
2009355, at *5-6; Hamburg, 1998 WL 559783, at *2 n.2 (holding that liquor liability exclusion
barred acts pleaded as negligent hiring of employees and negligently controlling the business as
“[a]n inseparable causal factor remains the serving of liquor”); Those Certain Underwriters,
1997 WL 22407, at *3 (holding that claims of negligently allowing inebriated patron to leave and
operate motor vehicle were barred because “if the insureds had not served alcohol to Holsworth,
they would have no possible obligation to him or to third parties foreseeably injured by him.”).9
Here, as in Lucchesi and the cases cited therein, the sole basis for liability against Heathland in
the State Court Litigation is the provision of alcohol to Whittingham when he was visibly
Such conduct is expressly excluded from coverage by the Liquor Liability
exclusions of the insurance policies.
After a careful review of the underlying State Court Complaints and the law governing
liquor liability exclusions in insurance policies, this Court finds that the claims asserted within
the four corners of the State Court Complaints fall squarely within the scope of the Liquor
Liability exclusions. Although the State Court Complaints include claims that do not explicitly
reference the provision of alcohol, the factual allegations demonstrate that all of the claims in the
complaints against Heathland arise from the furnishing of alcohol to Whittingham. As such, all
of the claims of negligence are inextricably intertwined with Serratore’s allegations of liability
arising from the service of alcohol. These claims, therefore, fall within the Liquor Liability
exclusions. Accordingly, CNA does not have a duty to defend or indemnify Heathland for the
State Court Litigation. 10
Here, like the insured in Lucchesi, Heathland has provided no support in Pennsylvania or New
Jersey law for the theory that “any commercial enterprise – even an enterprise that does not engage in the
sale or distribution of alcohol – would have a legal duty, upon seeing an intoxicated person enter, to
prevent him from leaving the establishment while intoxicated.” Lucchesi, 2012 WL 2009355, at *5-6
(M.D. Pa. June 5, 2012), aff’d, 563 F. App’x 186 (3d Cir. 2014). Thus, Heathland could only be held
liable in the State Court Litigation if it was found to have participated in the actual sale or furnishing of
Though not relevant to this Court’s determination that CNA’s duty to defend Heathland was not
triggered by the allegations in the underlying State Court Complaints because the claims as alleged fell
within the policies’ Liquor Liability exclusion, this Court finds that the indisputable evidence revealed in
discovery and presented by CNA also demonstrates that Heathland was in the business of selling, serving
and/or furnishing alcoholic beverages both at the Woodbury Country Club and other private country clubs
at the time of the underling incident. In particular, this evidence shows that the Woodbury Country Club,
For the reasons stated herein, CNA’s motion for summary judgment is granted,
Heathland’s motion for summary judgment is denied, and judgment is entered in favor of CNA.11
Two Orders consistent with this Memorandum Opinion follow.
NITZA I. QUIÑONES ALEJANDRO, U.S.D.C. J.
which indisputably sold and served alcohol as part of its business, hired Heathland “as a management
company to place a manager on the property to take care of the clubhouse operations and business,
including their office, financials, and oversee food and beverage.” (CNA Ex. 18, Wurtz Dep. Tr. at
232:6-11); (see also CNA Ex. 20, Kocinski Dep. Tr. at 49:13-50:13; 54:13-58:21; 108:22-23) (testifying
that Heathland was hired to run the entire club and oversee all employees, through a Heathland-placed
manager, including those directly tasked with selling, serving and/or furnishing alcohol to patrons).
Further, the written job description for the Heathland-placed manager provided the following as the
manager’s “Scope and General Purpose: To supervise and control all catering outlets in the club to the
required standards, within agreed budgetary limits and parameters of the law, particularly liquor law.”
(CNA Ex. 42) (emphasis added). Also, at the same time Heathland was providing management services
to the Woodbury Country Club, it was providing the same or similar management services to other
private clubs where alcoholic beverages were sold, served and/or furnished. (See CNA Ex. 18, Wurtz
Dep. Tr. at 382:20-383:11; 128:3-7; CNA Exs. 23 and 24 at Nos. 4, 7, 10, 13, 19, 22, 25, 31). This
undisputed evidence establishes that managing the selling, serving and furnishing of alcoholic beverages
for its private club clients, including the Woodbury Country Club, was a regular and integral part of
In its motion for summary judgment, CNA also argues that it had no duty to defend and/or
indemnify Heathland because the claims asserted in the underlying State Court Litigation all fell within
the General Liability Policy’s Professional Services exclusion and the Umbrella Policy’s Directors and
Officers exclusion. Because this Court has concluded that the claims asserted in the underlying State
Court Litigation fall within the Liquor Liability exclusion, it need not determine whether any other
exclusions apply. Notwithstanding, this Court finds that the undisputed evidence also shows that the
claims ultimately settled by Heathland, and for which it seeks indemnification, were premised on
Serratore’s allegations of Heathland’s negligent performance of professional services (in particular,
management services) which Heathland contracted to provide to the Woodbury Country Club. (See CNA
Ex. 32). Indeed, Heathland’s contracted-for professional services were emphasized by Serratore’s
counsel during the fairness hearing. (See CNA Ex. 37 at 6:6-18). As such, the Serratore claims that were
ultimately settled were also excluded by the Professional Services exclusion.
Finally, CNA also seeks summary judgment on Heathland’s counterclaims for declaratory
judgment, arguing that they are barred by applicable statutes of limitation. In its counterclaims,
Heathland merely seeks the opposite declarations sought by CNA with respect to CNA’s duty to defend
and indemnify. Because this Court has concluded that CNA is entitled to summary judgment in its favor
on its own claims for declaratory judgment with respect to its duty to defend and indemnify, this Court
need not address CNA’s arguments that Heathland’s counterclaims are barred by the statute of
CNA has also asserted a breach of contract claim (Count Two) premised on an alleged improper
assignment to Serratore of Heathland’s rights against CNA under the policies at issue. While neither
party addressed this claim in their respective motions for summary judgment, in light of this Court’s
disposition of Count One, the breach of contract claim is dismissed as moot.
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