WSTC Corp. v. National Specialty Ins. Co.
(Sup. Ct., Nassau Co., decided 6/19/2008)
We all know that the duty to defend is broader than the duty to indemnify, and that exclusions don't apply to negate the duty to defend unless they are unambiguous and the allegations of a complaint "cast that pleading solely and entirely within the policy exclusions, and further, that the allegations, in toto, are subject to no other interpretation." Automobile Ins. Co. of Hartford v. Cook, 7 NY3d 131, 137 (2006).
Transparent attempts to trasmogrify non-covered facts into covered ones are sometimes referred to as "pleading into coverage". Most courts see through such attempts, identifying instead the "operative act", core claim or "gravamen" of an action. See, e.g., Desir v. Nationwide Mut. Fire Ins. Co., 2008 NY Slip Op 3578, 1 (2nd Dept. decided 4/22/2008)("the inclusion in the underlying complaint of causes of action sounding in negligence and alleging carelessness does not alter the fact that 'the operative act giving rise to any recovery is the assault'"). Not this court.
National Specialty insures bars and clubs and issues a policy that, by endorsement, adds an Assault and Battery Exclusion, which provides:
Mr. Mello (real name) went to the insured's bar, VIBE, and, according to his own complaint in an underlying personal injury action, was "negligently" served several alcoholic beverages at VIBE while in an "obvious," "apparent," or "actual" (or maybe all three) state of intoxication and that after placing him in a "further state of intoxication" VIBE failed to protect him from the two bouncers who assaulted him. His complaint further alleged that VIBE "negligently and recklessly failed to supervise, manage and operate its premises in a safe and prudent manner" and "failed to afford (him) protection from the unlawful acts of other patrons or to stop or otherwise control the offensive and illegal conduct of other patrons and/or their own agents and/or employees including (their) own bartender and two unknown male bouncers."
[T]his insurance does not apply to " bodily injury" or "property damage" arising out of any assault, battery, fight, altercation, misconduct or similar incident or act of violence.
The exclusion applies whether the violence was: (a) caused by; (b) at the instigation of; or (c) at the direction of you, your "employee", your customers, patrons, guests or any other person or cause whatsoever. This exclusion also applies whether the insured may be liable as an employer or in any other capacity.
No coverage is provided under this policy if the underlying operative facts constitute an assault and/or battery irrespective of whether the claim alleges negligent hiring, training, supervision and/or retention against the insured, or for any other negligent actions of the insured.
National Specialty denied both defense and indemnification coverage based on the assault and battery exclusion, and WSTC commenced this DJ action. Notwithstanding the broad language of the exclusion, Nassau County Supreme Court Justice Joseph Spinola ruled that "in light of plaintiff Mello's first cause of action in which he advances a claim sounding in straightforward negligence which is covered by the policy, NSIC must defend VIBE in the Mello action. * * * Any further determination at this juncture as to whether the Assault and Battery Exclusion endorsement applies here would be premature."
Huh? What happened to the "irrespective of whether the claim alleges negligent hiring, training, supervision and/or retention against the insured, or for any other negligent actions of the insured" language of the exclusion? Drunk patron. No-neck bouncers. Physical escort/removal from the premises. Injuries to patron. Sounds exactly like the scenario to which the exclusion was intended to apply.
In light of the Second Department's decision in Desir, expect an appeal. And probably a reversal.