It is well known that courts require insurers to defend their insured if there is any possibility that coverage may potentially exist. Under New York law, the duty to defend is triggered whenever the allegations of a complaint, liberally construed, suggest a reasonable possibility of coverage, or the insurer has actual knowledge of facts establishing a reasonable possibility of coverage. Bruckner Realty, LLC v. County Oil Co., Inc., 40 A.D.3d 898, 900 (2007), Parler v. North Sea Ins. Co., 129 A.D.3d 926, 927 (2015), Burgund v. ESP Café, Inc., 84 A.D.3d 849, 850-51 (2011). For an insurance company to be relieved of its duty to defend under New York law, it must establish, as a matter of law, that there is no possible factual or legal basis on which the insurer might eventually be obligated to indemnify its insured under any policy provision. See, e.g., Matter of Transtate Ins. Co., 303 A.D.2d 516 (2003). In order to disclaim coverage on the basis of a policy exclusion, under New York law the insurer must demonstrate that the allegations of the complaint cast that pleading solely and entirely within the exclusion. Bruckner Realty, LLC, supra.
Notwithstanding the difficult course an insurer must navigate to avoid the duty to defend, the Supreme Court of New York recently found that the insurer had no obligation to defend the insured in an assault case.
In Amato v. National Specialty Ins. Co., 134 A.D.3d 966, 21 N.Y.S.3d 696 (2015), the plaintiff alleged that she sustained injuries as a result of an altercation with an intoxicated patron at an establishment owned by the insured. The plaintiff brought a personal injury action against the patron and the insured Bistro alleging that the Bistro was liable for her injuries for having unlawfully and knowingly sold or provided alcohol to a visibly intoxicated patron whom the Bistro knew would likely become intoxicated and violent. The plaintiff alleged that the intoxication contributed to the patron’s suddenly assaulting, battering, striking and injuring the claimant. It was also alleged that the Bistro knew of the patron’s propensity for violence and by serving alcohol to that patron violated the New York Dram Shop Act by allowing the patron to become and remain intoxicated on the premises and that the Bistro had negligently supervised, trained and instructed its staff and employees to deal with such patrons. It was alleged that the Bistro failed to safely maintain the premises for patrons including the plaintiff.
The insurer disclaimed coverage because of the policy’s assault and battery exclusion endorsement. The insurer argued that each of the claims raised by the plaintiff against the Bistro in the personal injury action arose out of the assault and/or battery by the intoxicated patron and, therefore, was excluded. Without much fanfare, the New York Supreme Court agreed.
The Court’s decision in Amato is not particularly colorful or significant legally. Finding a case that disposes of the insurer’s duty to defend summarily on the basis of an assault and battery exclusion is as rare as finding evidence of the existence of a unicorn. It’s just nice to know that such mythical creatures may exist and that courts sometimes don’t struggle to enforce policy exclusions.
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