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Ebert v. Illinois Cas. Co., 2021 WL 3853062 (Ind. Ct. App. 2021)

Illinois Casualty provided both general liability and liquor liability insurance policies to two bars, Little Daddy’s and Big Daddy’s.  A patron consumed alcohol at Big Daddy’s and became intoxicated.  Big Daddy’s was using a bouncer who was an employee of Little Daddy’s, which was closed.  After the patron became intoxicated, he was ordered to leave by the bouncer.  The patron left Big Daddy’s, and shortly after departing, was involved in an auto accident with the Eberts.

The Eberts brought a lawsuit against both bars who tendered the lawsuit to Illinois Casualty.  Illinois Casualty filed a declaratory judgment action contending that no coverage was owed under three of the four bar policies.  Illinois Casualty agreed that a defense was owed to Big Daddy’s under the liquor liability policy which had reduced coverage limits.  Illinois Casualty further contended that no coverage was owed under either of the Little Daddy’s policies because it was closed and did not serve alcohol.  Likewise, Illinois Casualty contended that certain exclusions in both bars’ general liability policies for “causing or contributing to the intoxication of any person” barred coverage under those policies.  The trial court granted summary judgment to Illinois Casualty finding that it owed neither a defense nor indemnity to the bars under the three policies at issue.

On appeal, the Court of Appeals reversed in part and affirmed in part.  The Court affirmed the trial court’s conclusion that the insurer owed neither a duty to defend nor to indemnify Little Daddy’s under the liquor liability policy, as it was closed and did not furnish alcohol to the patron.

However, the Court reversed the trial court’s summary judgment finding as to the applicability of both general liability policies.  The Court first addressed whether a duty to defend was owed.  While the Court concluded that the Eberts’ claims for dram shop liability against the bars were excluded, the Court found that some of the Eberts’ claims were independent of the alcohol claims and were sufficient to trigger a duty to defend.  The Court stated that “[t]hough all of the Eberts’ claims relate factually to [the patron’s] intoxication, some of them do not legally rely on the bar causing or contributing to that intoxication.”  Id. Thus, these claims were sufficient to require Illinois Casualty to defend the bars under the business policies.

The Court also addressed the trial court’s ruling that Illinois Casualty owed no duty to indemnify under the general liability policies.  In reversing the trial court’s summary judgment, the Court dismissed Illinois Casualty’s request that the Court determine it lacked a duty to indemnify by concluding such a claim was premature and unripe:

While the source of the duty to indemnify is also the contract, the duty to indemnify does not attach until a later triggering event:  the suffering of some loss by the insured.  It may be the case that Illinois Casualty will not owe a duty to indemnify the businesses for every claim.  But the bars have not yet suffered a loss.  The duty to indemnify has not been triggered.  Accordingly, questions regarding indemnity are unripe, and therefore, premature.

Id.  The Court then stated that the determination of whether a duty to indemnify is owed “must first be pursued to some end result.”

While the Court’s analysis of the duty to defend clearly flows from a fact-sensitive nature of the claims that are alleged, the Court’s analysis of the duty to indemnify may be interpreted overbroadly.  If read outside the context of the duty-to-defend analysis, the Court’s conclusion on the duty to indemnify in Ebert could be mistaken to suggest that the duty to indemnify can never be determined in a declaratory judgment action until after the claims in the underlying lawsuit have been decided. This is sometimes true but not necessarily so. If the underlying facts that affect coverage are undisputed, a court may be able to issue a declaratory judgment on both the duty to defend and the duty to indemnify while the underlying lawsuit is pending. For example, assume a plaintiff is injured in a fist fight with the insured and files a lawsuit asserting claims for negligent and intentional conduct. Based on the allegation of negligence, the insurer would have a duty to defend the insured. However, if the insured admitted in the underlying lawsuit that he punched the plaintiff, the insurer could file a declaratory judgment lawsuit seeking a determination that there is no duty to defend or indemnify based on the exclusion for injuries that the insured expects or intends to cause. The court in the declaratory judgment lawsuit would then be able to rely on the undisputed facts about the insured’s conduct to determine whether the insurer owes a duty to defend or indemnify the insured, even if the insured’s liability in the underlying lawsuit has not been decided. Thus, the Court’s holding in Ebert that the determination of the insurer’s duty to indemnify was not ripe because the insured had not yet “sustained a loss,” meaning an adverse judgment in the underlying lawsuit, is a fact-specific conclusion limited to the case.