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Ebert v. Illinois Cas. Co., 2022 WL 2166233 (Ind. 2022)

In September 2021, we reported on the Indiana Court of Appeals’ decision in this coverage dispute, which stems from a drunk driving accident. A bar called Big Daddy’s served alcohol to William Spence, who was later told to leave the bar by an off-duty bouncer who was employed by a second bar, Little Daddy’s, which was under common ownership with Big Daddy’s. Spence drove his car while intoxicated and collided with the Eberts’ vehicle. The Eberts sued both bars, each of which had a businessowners policy and a liquor liability policy issued by Illinois Casualty Company.

Illinois Casualty agreed that it owed a defense to Big Daddy’s under its liquor liability policy but sought a declaratory judgment that no coverage was owed under the other three policies. Illinois Casualty argued that Little Daddy’s policies did not provide coverage because Little Daddy’s was closed and did not serve alcohol to Spence. Illinois Casualty also argued that no coverage was owed to Big Daddy’s or Little Daddy’s under their businessowners policies because those policies excluded coverage for liability arising “by reason of causing or contributing to the intoxication of any person.” In our previous report, we discussed how the Court of Appeals held that Little Daddy’s liquor liability policy provided no coverage but found Illinois Casualty Company had a duty to defend Big Daddy’s and Little Daddy’s under their businessowners policies. The insurer petitioned for transfer to the Indiana Supreme Court, which reversed the Court of Appeals and affirmed the trial court’s entry of summary judgment for the insurer because of the liquor liability exclusion.

The Court first addressed whether the liquor liability exclusion in the businessowners policies was ambiguous. The bars argued the exclusion was ambiguous and could not be read to apply to “every possible allegation that could occur at a bar,” as that would make the coverage “illusory.” In rejecting this argument, the Court stated that the exclusion is not ambiguous “simply because it is broad in scope.” Like other courts, the Court found that reasonable people could not honestly differ over the meaning of the term “intoxication” or the phrase “under the influence.” Thus, the exclusion was not ambiguous.

The Indiana Supreme Court next addressed whether the exclusion applied to the claims the family asserted against the bars. The Court of Appeals held that the exclusion did not relieve Illinois Casualty of its duty to defend because even “[t]hough all of the Eberts’ claims relate factually to Spence’s intoxication, some of them do not legally rely on the bar causing or contributing to that intoxication.” Id. In reversing the Court of Appeals, the Indiana Supreme Court relied on the Court of Appeals’ “efficient and predominant cause analysis.” See Prop-Owners, Ins. Co. v. Ted’s Tavern, Inc., 853 N.E.2d 973, 983-84 (Ind. Ct. App. 2006).

The Supreme Court turned to the allegations in the family’s second amended complaint, which it summed up in a sentence: “Big Daddy’s served Spence alcohol, and he subsequently drove his vehicle from the premises while intoxicated and collided with the Eberts’ vehicle.” Although the Court of Appeals noted that the bars could be liable for failing to intervene even if Spence had arrived already intoxicated or he had suffered impairment from an epileptic seizure, the Supreme Court noted that the Eberts did not allege “such hypotheticals in their second amended complaint.” The Supreme Court also stated that it could not “ignore the circumstance necessitating intervention in the first place: the service of alcohol to an intoxicated Spence.” “Because the allegations that the bars failed to intervene were “inextricably intertwined” with the allegations that the bars caused or contributed to Spence’s intoxication, the Supreme Court agreed with the trial court that “Spence’s intoxication was the efficient and predominant cause of the Eberts’ injuries.” Thus, the Supreme Court affirmed the trial court’s entry of summary judgment for Illinois Casualty and held it had no duty to defend or indemnify Big Daddy’s or Little Daddy’s businessowners policies or under Little Daddy’s liquor liability policy.

The decision in Ebert exemplifies the proper application of the “efficient and predominant cause” analysis in a common dram shop claim scenario.