Alea London Limited v. Bono-Soltysiak Enterprises

186 S.W.3d 403 (2006)

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Nature of the Case

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Facts

P is a surplus lines insurer based in London, England. P commenced covering Laclede Street (D) on December 20, 2001. Evidence of the coverage was contained in a document faxed by P's Arkansas broker and general agent, to Midwest Agency, D's insurance broker. The document contained a written description of the amount of the coverage, the premium, and the liability limits. The document specifically referenced a 'condition': 'Excludes Assault & Battery.' On January 3, 2002, Michael Metzger, a D patron, fatally stabbed Michael Weger in the parking lot of D. Metzger was later convicted of involuntary manslaughter and armed criminal action in connection with Weger's death. On January 16, 2002, P issued the policy to D. The policy identified the effective coverage period as December 20, 2001 to December 20, 2002. It identified D as a restaurant 'with no sale of alcoholic beverages -- without dance floor.' The January 16 policy included a liquor liability exclusion which provided as follows: 'Bodily injury' or 'property damage' 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. The policy also contained an attached 'Combination Endorsement -- 1' which materially altered the policy by, among other things, deleting and replacing the 'Expected or Intended Injury' exclusion in the main body of the policy, and provided as follows: Exclusion -- Assault or Battery Exclusion a. of Coverage A (Section 1) is deleted and replaced with the following: 'Bodily injury' or 'property damage': (1) expected or intended from the standpoint of any insured; (2) arising out of assault or battery, or out of any act or omission in connection with the prevention or suppression of an assault or battery; or (3) arising out of charges or allegations of negligent hiring, training, placement or supervision. Weger's parents filed a wrongful death suit against D. P issued a reservation of rights letter agreeing to undertake defense of the lawsuit. P then filed a Petition for Declaratory Judgment seeking a determination that the policy P issued subsequent to Weger's death did not cover the Wegers' claims. P moved for summary judgment, which was denied. P then claimed it made a mistake in classifying D as a 'restaurant which did not serve any alcohol' and sought reformation of the policy to show 'the proper business description as a restaurant serving less than 75% alcoholic beverages.' P’s expert testified that the Endorsement contained language that was standard, but acknowledged there were multiple versions of assault and battery exclusions used in the surplus lines industry. D’s expert testified that the language in the Endorsement was not 'mainstream' and was 'draconian.' Dean Brown, the Midwest Agency broker who obtained the P policy, testified that the surplus lines industry used several different types of assault and battery exclusions and the binder provided no direction regarding which assault and battery exclusion would be used in the policy. D subsequently obtained a surplus lines policy that did not contain the type of restrictive exclusion described in the Endorsement. D got the judgment. The court held that as a matter of law, the binder was the 'operative insurance contract,' acknowledging, however, that in general, a binder may be governed by the terms of a later issued policy 'only if the policy in question is a 'standard of policy.” P appealed.