The Ontario Superior Court of Justice has recently held that a liability insurer is not obligated to defend an insured bar operator from a liquor liability claim brought by an injured patron.
In Kelloway v. Jack-O's Sports Bar, 2023 ONSC 5925, the Plaintiff alleges that the Defendant, the operator of a Woodstock, Ontario sports bar, overserved him with alcohol, as a result of which he fell off of a barstool and was then forcibly ejected from the premises, causing him to suffer personal injuries (the "Claim"). The Defendant named its insurer, United States Liability Insurance Company (the "Insurer"), as a third party to the Claim and argued that the Insurer was under a duty to defend the Claim under a commercial general liability with liquor liability coverages (the "Policy"). The Insurer brought a motion seeking a declaration that it was not obligated under the Policy to defend this particular Claim.
In reasons for judgment on the Insurer's motion, the Court began its analysis by reviewing the precise nature of Plaintiff's allegations in the Claim. The relevant portions were:
On or about December 10, 2021, Guy (the Plaintiff) attended at the Defendants' property after consuming alcohol at his residence. He continued to consume alcoholic beverages sold to him at the Defendants' property until he was so intoxicated, he fell off the stool he was sitting on. Doug (the owner of the Defendant bar) then aggressively and physically escorted Guy out of the establishment through the back alley exit where Guy's face struck the wall and he fell to the ground. As a result of this incident, Guy sustained serious and painful injuries.
[...]
In the alternative, Doug intentionally assaulted and battered Guy while and/or after removing him from the property.
It was not disputed that the Claim fell within the Policy's coverage for "those sums that the insured becomes legally obligated to pay as "compensatory damages" because of "bodily injury" or "property damage" to which this insurance applies". However, the Insurer took the position that the loss was excluded by an assault and battery exclusion, which removed coverage for:
"bodily injury"... sustained by any person, including emotional distress and mental anguish, arising out of, directly or indirectly result from, in consequence of, or in any way involving "assault" or "battery"... arising out of or caused in whole or in part by negligence or other wrongdoing...
(the "Assault and Battery Exclusion")
All parties agreed that, on its own, a bar patron falling from a barstool would be an occurrence within the grant of coverage under the Policy that the Insurer would be obligated to defend. Similarly, all parties agreed that a standalone assault committed by the insured defendant's staff would fall within the Policy's Assault and Battery Exclusion and would clearly not be covered. The question for the Court was whether the allegations in the Claim, in the mixed fashion in which they had been pled, gave rise to a "mere possibility of coverage" under the Policy. If so, the duty to defend would be triggered and the Insurer would be obligated to defend the insured defendant against the Claim, not withstanding that the Assault and Battery Exclusion might ultimately be found to exclude coverage for the Claim under the Policy.
Despite the low threshold for the existence of a duty to defend (being a mere possibility of coverage based on the pleadings), the Court held that there was no possibility of coverage under this Policy and therefore no duty to defend existed. While the Claim may have alleged an event which would, on its own, give rise to coverage (the fall from the barstool), the problem for the insured defendant was that this event was pled in such a way that it was not conceptually separable from an unambiguously excluded event – the alleged assault by the bar owner. The court explained (emphasis in original):
[The Claim] includes both the falling from the stool and the alleged aggressive and physical escorting of the plaintiff by the defendant [Doug] from the premises, whereupon the plaintiff sustained his injuries... Any injuries sustained from the fall from the stool cannot be severed from the claim. The exclusionary language is drafted in the broadest terms such that the defined terms of "assault" or "battery" need only be part of the chain of events leading to the claimant's injuries. The exclusion clauses negate coverage for bodily injury "arising out of, directly or indirectly resulting from, in consequence of, or in any way involving assault or battery". In other words, even if there is a claim in negligence arising from the plaintiff's fall from the barstool, the alleged events are also connected to his subsequent removal from the defendant premises, and also involve allegations of assault or battery as defined in the Policy, such that there is no duty to defend.
As a result, the Insurer was not under a duty to defend the Claim and the motion was granted, with costs to the Insurer.
This decision provides an informative counter-point to the more typical outcome of duty to defend motions, which usually result in a finding that an insurer's duty to defend is triggered by allegations made in a claim. This case will provide guidance for counsel and the courts when faced with a pleading that raises interconnected issues of fact, some of which appear to fall within coverage, and some of which do not.
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