Transportation Insurance Co v. Heathland Hospitality

Opinion

NOT PRECEDENTIAL

UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT

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No. 17-3683

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TRANSPORTATION INSURANCE CO;

CONTINENTAL CASUALTY CO

v.

HEATHLAND HOSPITALITY GROUP LLC; HEATHLAND HOSPITALITY GROUP LP;

JUDITH M. SERRATORE, As Administratrix of the Estate of Frank J. Serratore and Ms. Serratore Individually, Appellants

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Appeal from the United States District Court for the Eastern District of Pennsylvania (D.C. No. 2-15-cv-04525)

District Judge: Hon. Nitza I. Quiñones Alejandro

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Submitted under Third Circuit L.A.R. 34.1(a)

May 23, 2019

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Before: McKEE, SHWARTZ, and FUENTES, Circuit Judges.

(Opinion filed: July 26, 2019)

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OPINION*

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*

This disposition is not an opinion of the full Court and, pursuant to I.O.P. 5.7, does not constitute binding precedent.

FUENTES, Circuit Judge.

Transportation Insurance Company and Continental Casualty Company

(collectively, “T&C”) brought this declaratory judgment action against their insureds

Heathland Hospitality Group, LLC, and Heathland Hospitality Group, LP (collectively,

“Heathland”), and Judith M. Serratore, individually and as Adminstratrix of the Estate of

Frank J. Serratore. At the summary judgment stage, the District Court concluded that

T&C does not have a duty to defend and indemnify Heathland in a lawsuit brought by

Mrs. Serratore against Heathland in Pennsylvania state court. Heathland and Mrs.

Serratore now appeal that decision.

We conclude that the Court properly determined that the liquor liability exclusions

in Heathland’s insurance policies apply, and therefore T&C does not have a duty to

defend and indemnify Heathland in Mrs. Serratore’s suit. For the following reasons, we

will affirm the District Court’s order granting summary judgment in favor of T&C.

I.

In November 2010, Mrs. Serratore, individually and as Administratrix of the

Estate of Frank J. Serratore, sued Woodbury Country Club, Heathland, and Michael

Whittingham in Pennsylvania state court.1 She later filed an amended complaint,

asserting a common law negligence claim against Heathland.

1 Mrs. Serratore also filed a nearly identical lawsuit in New Jersey state court. However, she subsequently withdrew that lawsuit. The only difference between the Pennsylvania state court action and the New Jersey state court action is that the New Jersey action was brought against additional defendants. On appeal, Heathland’s briefing only cites to, and discusses, the claims made in the Pennsylvania state court action. Accordingly, we will only refer to the Pennsylvania state court action.

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As alleged in the complaint, on November 16, 2008, Mrs. Serratore’s husband was

fatally injured when the car that he was driving was struck by another car in Gloucester

Township, New Jersey. The other car was driven by Whittingham, who was allegedly

intoxicated at the time of the accident. According to the complaint, earlier that day,

Whittingham became intoxicated at the Woodbury Country Club, “a business

establishment that sold alcoholic beverages.”2 “At all times relevant,” Defendant

Heathland “provided management, training, supervision and other services to and for

Woodbury Country Club including food and beverage sales and services.”3

In particular, the complaint alleged that the Country Club and/or Heathland (1)

“sold or gave”4 alcohol to Whittingham, who “became intoxicated,”5 and (2) continued to

serve him alcohol while he was “visibly intoxicated.”6 Whittingham then left the Country

Club “visibly intoxicated,” got into his car, and drove away from the Club.7 At some

point after leaving the Club, Whittingham was involved in the car accident that resulted

in Mr. Serratore’s death.

In her lawsuit, Mrs. Serratore alleged that Heathland was responsible for

Whittingham’s intoxication and her husband’s resulting death because, among other

things, Heathland (1) served and/or permitted alcohol to be served to Whittingham “to the

2 App. 240 ¶ 6. See id. at 260 ¶ 33 (incorporating paragraphs 1 through 26 of the initial complaint into the amended complaint). 3 Id. at 241 ¶ 7. 4 Id. at 241 ¶ 8. 5 Id. at 241 ¶ 9. 6 Id. 7 Id. at 241 ¶ 10.

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point where he became visibly intoxicated,”8 and also served and/or permitted alcohol to

be served to Whittingham “when he was visibly intoxicated;”9 (2) “fail[ed] to train,

manage, supervise and oversee the sale of alcohol;”10 and (3) failed to institute policies

and procedures governing the “use and consumption of alcohol.”11

Pursuant to the insurance policies that T&C had issued to Heathland,12 Heathland

sought a defense and indemnification from T&C for the claims asserted in the state court

actions. By letter, T&C denied insurance coverage based on the policies’ liquor liability

exclusions.

In April 2015, Heathland and Mrs. Serratore entered into a settlement agreement

entitled “Confidential Assignment and Covenant of Cooperation.”13 Under the

agreement, Heathland consented to a $6 million judgment and assigned its rights against

T&C to Mrs. Serratore. Heathland and Mrs. Serratore also entered into a Stipulated

Judgment. In August 2015, a Pennsylvania court approved and entered the Stipulated

Judgment against Heathland.

8 Id. at 261 ¶ 35(a). The amended complaint includes two paragraphs which are labeled as paragraph 35. We are citing to the paragraph which appears on pages 3 through 5 of the complaint and includes subparagraphs (a) through (y). 9 Id. at 261 ¶ 35(b). 10 Id. at 263 ¶ 35(w). 11 Id. at 261–62 ¶ 35(i). 12 Specifically, Transportation Insurance Company had issued a commercial general liability policy to Heathland, while Continental Casualty Company had issued a commercial umbrella policy to Heathland. 13 App. 740–50.

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Thereafter, T&C filed this suit under the Declaratory Judgment Act,14 seeking a

declaration that it had no duty to defend and indemnify Heathland because the policies’

liquor liability exclusions exempted it from those duties. The District Court granted

T&C’s motion for summary judgment, and denied Heathland’s cross-motion for

summary judgment. This appeal followed.

II.15

We review the District Court’s grant of summary judgment de novo.16 Summary

judgment is warranted if the moving party “shows that there is no genuine dispute as to

any material fact and the movant is entitled to judgment as a matter of law.”17 We view

all facts “in the light most favorable to the non-moving party” and draw all reasonable

inferences in that party’s favor.18

III.

Under Pennsylvania law, to determine whether an insurer has a duty to defend its

insured in a suit, we must compare “the four corners of the insurance contract to the four

corners of the complaint.”19 Notably, “the particular cause of action that a complainant

14 28 U.S.C. § 2201. 15 The District Court had jurisdiction under 28 U.S.C. §§ 2201(a) and 1332. We have jurisdiction under 28 U.S.C. §§ 2201(a) and 1291. 16 Jutrowski v. Twp. of Riverdale, 904 F.3d 280, 288 (3d Cir. 2018). 17 Fed. R. Civ. P. 56(a). 18 Jutrowski, 904 F.3d at 288 (internal quotation marks and citation omitted). 19 Am. & Foreign Ins. Co. v. Jerry’s Sport Ctr., Inc., 2 A.3d 526, 541 (Pa. 2010) (citation omitted).

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pleads is not determinative of whether coverage has been triggered. Instead it is necessary

to look at the factual allegations contained in the complaint.”20 Those factual allegations

“are to be taken as true and liberally construed in favor of the insured.”21

Here, the general liability policy issued by Transportation Insurance Company

contains a “Liquor Liability” exclusion, which provides:

[t]his insurance does not apply to . . . ‘[b]odily injury’ . . . for which any insured may be held liable by reason of:

(1) Causing or contributing to the intoxication of any person;

(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 alcoholic beverages.22

Furthermore, the umbrella policy issued by Continental Casualty Company also

includes a nearly identical “Liquor Liability Limitation,” which states:

[t]his insurance does not apply to . . . ‘[b]odily injury’ . . . for which any insured may be held liable by reason of:

(1) Causing or contributing to the intoxication of any person;

(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.

20 Mut. Ben. Ins. Co. v. Haver, 725 A.2d 743, 745 (Pa. 1999). 21 Frog, Switch & Mfg. Co. v. Travelers Ins. Co., 193 F.3d 742, 746 (3d Cir. 1999). 22 App. 176–77 (emphasis added).

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Unless, and then only to the extent that coverage is provided by ‘scheduled underlying insurance.’23

On appeal, Heathland renews its argument that the liquor liability exclusions do

not apply because it was not “in the business of . . . selling, serving, or furnishing

alcoholic beverages” at the Country Club.24 We disagree. The allegations in the

complaint are that (1) Woodbury Country Club “was a business establishment that sold

alcoholic beverages;”25 (2) Heathland managed the Country Club’s “food and beverage

sales and services,” and trained and supervised the Country Club’s employees as to those

sales and services;26 and (3) the Country Club and/or Heathland “sold or gave alcoholic

beverages to Defendant[] Whittingham who consumed the beverages on the premises of”

the Country Club.27 The complaint unequivocally alleges that Heathland was “in the

business of . . . selling, serving or furnishing” alcohol at the Country Club.28

We likewise reject Heathland’s contention that the liquor liability exclusions only

apply to some of Mrs. Serratore’s negligence-related theories of liability.29 As

23 Id. at 199–204. The general liability policy is one of the insurance policies defined in the umbrella policy as “scheduled underlying insurance.” Id. at 193. 24 Id. at 177. 25 Id. at 240 ¶ 6. 26 Id. at 241 ¶ 7. 27 Id. at 241 ¶ 8. 28 Id. at 177. 29 Heathland’s reliance on the Pennsylvania Superior Court’s decision in Penn-America Ins. Co. v. Peccadillos, Inc. is misplaced. 27 A.3d 259 (Pa. Super. Ct. 2011) (en banc), pet. for allowance of appeal denied, 34 A.3d 832 (Pa. 2011). “Pennsylvania’s Supreme Court tells us that an insurer’s duty to defend turns on the allegations within the four corners of a complaint matched against the terms of the insurance policy.” Lupu v. Loan City, LLC, 903 F.3d 382, 395 (3d Cir. 2018) (citing Kvaerner Metals Div. of Kvaerner U.S., Inc. v. Commercial Union Ins. Co., 908 A.2d 888, 896 (Pa. 2006)). Here, the complaint alleges that Whittingham “consumed” alcohol while on the premises of the

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acknowledged by the District Court, while it is true that some of the claims do not

explicitly refer to the provision of alcohol,30 those claims are not independent from the

provision of alcohol. Rather, all of Heathland’s allegedly negligent acts and/or omissions

are closely linked to Heathland and/or the Country Club’s negligent furnishing of alcohol

to Whittingham – conduct that is plainly covered by the exclusions.

The liquor liability exclusions thus apply and bar insurance coverage of all of Mrs.

Serratore’s claims against Heathland.31 Accordingly, the District Court did not err by

holding that T&C has no duty to defend and indemnify Heathland.32 Moreover, contrary

to Heathland’s assertion, the District Court did not improperly decide genuine issues of

material fact in reaching that holding. The Court’s detailed opinion demonstrates that, in

Country Club, App. 241 ¶ 8, and not only “became intoxicated” but was also “served alcohol while visibly intoxicated,” Id. at 241 ¶ 9. It further alleges that the Country Club and/or Heathland “sold or gave” the alcohol to Whittingham. Id. Thus, based on the allegations in the complaint, Mr. Serratore’s fatal bodily injury is one for which Heathland “may be held liable by reason of . . . [c]ausing or contributing to the intoxication of” Whittingham, or “by reason of . . . furnishing” alcohol to Whittingham when he was “under the influence of alcohol.” Id. at 176–77. Accordingly, under the four corners rule, all of Mrs. Serratore’s negligence claims fall squarely within the liquor liability exclusions. 30 For example, Mrs. Serratore alleges that Heathland was negligent for, among other things, “allowing the Defendant, Whittingham to exit the Woodbury Country Club after he became intoxicated and visibly intoxicated.” Id. at 262 ¶ 35(m). 31 Given our conclusion that the claims asserted in the state court actions fall within the liquor liability exclusions, we need not address whether the general liability policy’s “Professional Services” exclusion applies. Id. at 179. 32 Because the duty to defend is broader than the duty to indemnify, Heathland’s claim for indemnification also fails. See Kvaerner, 908 A.2d at 896 n.7.

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applying Pennsylvania’s four corners rule, it correctly considered the plain meaning of

the language in the exclusions.33

IV.

For the reasons stated above, we affirm the District Court’s order granting T&C’s

motion for summary judgment.

33 See Lupu, 903 F.3d at 393 (recognizing that in Pennsylvania, “[g]enerally, an insurance policy’s plain meaning controls” (citation omitted)).