A patron in a bar room falls and injures her foot. The bar owner claims she was intoxicated; the patron claims the floor was wet. The bar owner does not have a separate liquor liability policy in place. Should the CGL policy at least step in to defend the insured?
Q: "A patron in a bar room falls and injures her foot. The bar owner claims she was intoxicated; the patron claims the floor was wet. The bar owner does not have a separate liquor liability policy in place. Should the CGL policy at least step in to defend the insured? Shouldn’t medical payments apply?"
A: “The bar owner appears to have made at least two critical mistakes:
1) Not buying liquor liability for a business that exists to sell liquor.
2) Claiming the cause of the injury was the serving of liquor, rather than agreeing with the patron that the cause of the injury was a slip and fall—something allegedly unrelated to the consumption of liquor and likely covered by the CGL policy.
The ISO CGL policy normally owes a defense based on the allegations the injured party makes. If the injured party claims legal liability on the part of the bar owner due to a cause unrelated to the sale or serving of alcohol, then the insurer usually owes a defense, unless it can get a court to dismiss the case in a declaratory judgment.
But to trigger the defense, especially given the circumstances, the patron might actually have to file a lawsuit or at least have an attorney threaten to do so before the insurer will act.
If the carrier is currently applying the liquor liability exclusion in an ISO CGL policy, it applies to medical payments as well because all Coverage A exclusions also apply to Coverage C.
The bottom line? Yes, the insurer probably owes a defense if the claim/allegation is that the patron slipped on a wet floor where liquor consumption played no part in the injury. Based on that allegation and the facts in question, getting the insurer to provide that defense could be very difficult in the absence of a filed lawsuit.
The insured made a foolish mistake in insisting the customer was drunk instead of acknowledging the simpler premises of a slip and fall. Not to be accusatory, but the agency in question also made a critical mistake: agreeing to sell a CGL policy to a bar that refused to buy liquor liability coverage.”
Bill Wilson is director of the Big “I” Virtual University.
This question was originally submitted by an agent through the VU’s Ask an Expert Service. Answers to other coverage questions are available on the VU website. If you need help accessing the website, email logon@iiaba.net to request login information.
