Liquor Liability Suit Did Not Bypass Exclusion

Commercial Liability	No Duty to Defend
Liquor Liability	Liquor Exclusion

The parents of a young girl, who died in a car accident caused by an intoxicated driver, filed a lawsuit against a bar that had served alcohol to the intoxicated man. The complaint claimed negligence in permitting the tavern patron to drive. It did not mention the selling of alcohol to an intoxicated person.

The bar's general liability insurer denied coverage based on the liquor liability exclusion in the policy and initiated a declaratory judgment action to determine its obligations to the insured. The trial court, proceeding on the duty to defend (after granting a motion by the insured and the child's parents to dismiss the indemnity claim), made the following remarks:

"The Court is faced with a situation in which there is an unambiguous insurance policy containing an unambiguous exclusion clause and an allegation in a petition which does not mention impairment by reason of alcohol. The undisputed facts extraneous to the petition are, however, that (the offending driver's) impaired state was the result of his having consumed numerous alcoholic beverages at the insured's establishment."

An appeal followed the trial court's conclusion that the insurer had no obligation to defend its insured in the underlying lawsuit. The appellate court found it clear that the parents had made no reference to "alcohol" or intoxication in their suit to avoid the pertinent liquor liability exclusion. The parents argued that the trial court erred in "looking beyond" their complaint and determined that their claims "ultimately derive from the selling or giving of alcohol to an intoxicated person."

The appeal court cited State Farm Fire & Casualty Company v. Wade, 827 S.W.2d 448 (Tex. Civ. App. Corpus Christi 1992), stating: "When the petition in the underlying lawsuit does not allege facts sufficient for a determination of whether those facts, even if true, are covered by the policy, the evidence adduced at the trial in a declaratory judgment action may be considered along with the allegations in the underlying petition."

The trial court's judgment was upheld regarding its ruling that the insurer had no duty to defend, and it was modified by the appellate court's finding that the insurer had no obligation to provide indemnity when it did not have a duty to defend.

Western Heritage Ins. Co., Plaintiff-Appellant-Cross-Appellee v. River Entertainment DBA Pepe's On The River Et AL., Defendants-Appellees-Cross-appellants. U.S. Court of Appeals for the Fifth Circuit. No. 92-7682. Aug. 23, 1993. CCH 1993-94 Fire and Casualty Cases, Paragraph 4568.