NOTE –
This is from our older court case archives. It may involve situations that are
inapplicable to newer coverage forms. Please be aware of this possibility when
reading and using this case.
Fraternal
Organization Found Subject to Liquor Liability Exclusion
|
General
Liability |
|
Liquor
Exclusion |
A woman who
was seriously injured in an automobile accident, caused by a man who, while
under the influence of liquor, crossed the center of the road and crashed into
her car, initiated legal action in which two automobile insurers joined her in
seeking recovery from the general liability insurer of a lodge where the
responsible driver has been served drinks. The trial court granted summary
judgment in favor of the insurer on the basis of liquor liability exclusion in
the policy.
On appeal,
the issue was whether or not the following pertinent exclusion applied to
nonprofit corporations: “This insurance does not apply…to bodily injury or
property damage for which the insured or his indemnitee may be held liable…as a
person or organization engaged in the business of manufacturing, distributing,
selling or serving alcoholic beverages.” The injured woman and the automobile
insurers contended that it did not, that the lodge was a nonprofit fraternal
organization not “engaged in the business” of selling or serving alcoholic
beverages.
The court
rejected the reasoning of the supreme courts of New Hampshire and Massachusetts
that the character of the organization, rather than its activities, should be
determining. The appeal court here noted that the insured fraternal
organization operated its bar at a significant profit, virtually all of which
was for the benefit of members and to support its operations. It had a liquor
license and derived 83% of its income from the bar. Non-members were allowed on
the premises.
The court
concluded that, regardless of the nonprofit nature of its charter, the
fraternal organization was “engaged in the business of selling and serving
alcoholic beverages.” Such activity was specifically excluded from policy
coverage. The judgment of the trial court was affirmed in favor of the
insurance company.
Mcgriff Et Al., Plaintiffs, Appellants v. United States Fire Insurance Company, Defendant, Appellee V. Fraternal Order Of The Eagles Of Rapid City, South Dakota, Third-Party Defendant, South Dakota Supreme Court No. 16272-a-Ram. March 8, 1989. CCH 1989 Fire and Casualty Cases, Paragraph 1576.