Interpretation Of Policy

For folks in Grand Prairie, Arlington, Fort Worth, North Richland Hills, Hurst, Euless, Bedford, Keller, Colleyville, Saginaw, Lake Worth, and other places in Texas, interpreting an insurance policy is something that is very hard to do. Even an experienced Insurance Lawyer cannot always assure someone who asks what an outcome may be if there is a dispute.
Based on decisions and opinions issued by courts in Texas, an experienced Insurance Law Attorney can give guidance to probable outcomes of disputes. Here is one of those cases that the attorney would have read and used as a resource.
The case is Colony Insurance Company v. ACREM, INC. d/b/a Stetsons Nightclub, and was decided by the United States District Court for the Southern District of Texas Houston Division. The opinion was issued on February 23, 2011.
This case, a declaratory judgment action, arises out of lawsuit filed in state court wherein the plaintiffs sued Stetsons for an alleged accident that occurred while plaintiffs were patrons of Stetson’s on the evening of September 1, 2007. The plaintiffs allege they were leaving the nightclub and while walking through the Stetson’s parking lot, they were struck from behind by a vehicle driven by patrons of Stetson’s that night. The plaintiffs allege that Stetsons improperly provided alcohol to the patrons when they were obviously intoxicated. Stetsons filed a claim under their policy of insurance with Colony asking Colony to defend the lawsuit and provide indemnity for any resulting judgment against it. Colony denied that it owed Stetsons a duty to defend or indemnify.
Colony filed this lawsuit in Federal Court asking the court to issue an order saying that Colony did not have a duty to defend or indemnify based on policy language in the policy.
Colony relies on the “Absolute Auto, Aircraft and Watercraft Exclusion” (Auto Exclusion), that excludes coverage for any bodily injury arising out of or resulting form the use of an automobile. Stetsons replies on the “Limitation to Coverage to Business Description” (Business Limitation), that limits coverage to bodily injury that is caused by or results from the business described in the policy, specifically as “Bar with Dance Floor.”
In discussing this case the court said it was well settled law that, “An insurer owes its insured a duty to defend if a plaintiff’s factual allegations potentially support a covered claim. Whether the insurer owes a duty to defend is question of law for the Court to decide. When faced with a coverage dispute, the Court must give effect to the intention of the parties as that intention is expressed in the insurance policy itself.”
The focus for the court is on the factual allegations in the underlying complaint, not on the legal theories. The Court is required to “resolve all doubts regarding the duty to defend in favor of the duty” and to “construe the pleading liberally.” The law is clear that when a lawsuit potentially includes a covered claim, the insurer must defend the entire lawsuit.
“Where there is no duty to defend, and there are no facts alleged in the underlying lawsuit that could create coverage if proven at trial, the Court may conclude that the insurer had no duty to indemnify for the claims in the underlying lawsuit.”
In this case, the court said that the policy includes an Auto Exclusion that excludes coverage for bodily injury arising out of or resulting from the use of any automobile. The plain meaning of the Auto Exclusion is that it excludes coverage for claims that arises out of incidents involving automobiles.
The court did not accept any of the arguements by Stetsons. The court pointed out that the Auto Exclusion precluded coverage whether the automobile was owned and/or operated by the insured or by a third party because the exclusion applied to bodily injury arising out of or resulting from the use of “any” automobile and did not distinguish between “cars owned and operated by the insured and cars owned and operated by patrons.”
Stetsons argued that it intended for the Auto Exclusion to exclude coverage only if the automobile involved in the incident was owned or operated by an employee and other agent of Stetsons. This arguement failed because it is unsupported by clearly established Texas law. Under Texas law, the intent of the parties is determined by the unambigouous terms fo the contract itself.
The court ended up ruling that there was no coverage provided by this insurance policy for the claim being made. A reading of this case helps in allowing an understanding of how the courts look at these coveage issue cases.