Though courts strictly interpret insurance policies with an eye towards finding coverage whenever possible, they will enforce clear and unambiguous policy terms. In Good v. Frankie & Eddie’s Hanover Inn, LLP and RCA Ins. Group on Behalf of State Nat’l Ins. Co., the issue before the Superior Court of Pennsylvania was the interpretation of the limit of coverage offered under a liquor liability coverage part in connection with a wrongful death/survival action.

The insured tavern had served alcohol to a driver who subsequently drove under the influence and crashed into the deceased motorcycle operator. The tavern’s insurance policy included a Liquor Liability Coverage Form, which provided coverage with an “Aggregate Limit” and an “Each Common Cause Limit.”  The form expressly defined the each common cause limit as “the most we will pay for all ‘injury’ sustained by one or more persons or organizations as the result of the selling, serving or furnishing of any alcoholic beverage to any one person.”  The policy’s declarations page did not include this latter term but expressed the applicable liquor liability limits as $500,000 for “Each Occurrence” and $1 million “Aggregate.” The plaintiff took the position that the term “each common cause limit” was ambiguous and not parallel to the declarations page’s “occurrence” language.

During the pendency of the litigation against the tavern, the parties reached a settlement agreement whereby the insurer agreed to pay its $500,000 limit on behalf of its insured with the understanding that a declaratory action would proceed to resolve the limit of coverage issue.

As a result of cross-motions filed by the parties, the trial court found that the policy terms unambiguously expressed the intent of the contracting parties that there would be separate liquor liability limits for Each Common Cause, i.e. claims arising from alcoholic beverage service to one person, and for the Aggregate of all claims made involving service to more than one person. Per the clear terms of the policy, there had to be a distinction between the two limits, and the declarations page, while using different terminology, provided for this in the $500,000 per occurrence limit and the $1 million aggregate limit.

The plaintiff made creative arguments to subvert the clear policy language that the court and appellate court roundly rejected. For example, she argued that the “occurrence” limit simply did not apply because this term was not defined in the liquor liability coverage part.  Alternatively, she argued that “occurrence” is ambiguous without definition and should be read to provide $500,000 per each category of damages (i.e. wrongful death and survival actions).  Finally, she claimed that the phrases “Each Occurrence” and “Each Common Cause” were not interchangeable within the insurance industry.

In affirming the lower court, the appellate court held “the only reasonable conclusion, consistent with the intention of the parties and the reasonable expectations of the insureds, is to apply the “Each Occurrence Limit” as the “Each Common Clause Limit.”

Thanks to Lauren Berenbaum for her contribution.

For more information, contact Denise Fontana Ricci at .