I have great news for you. Since you are reading Coverage Opinions right now that means you are not watching a commercial for Draft Kings or Fan Duel. No need to thank me. Just a little favor for you, dear reader.

[This article originally appeared in the October 30, 2013 issue of Coverage Opinions.]

It is the oldest admonishment in the book from parent to child – don’t talk to strangers. But one day a year we make an exception. And more than just letting our kids talk to strangers, we even let them accept food from them. Of course parents change the rules on Halloween. But while parents can be flexible on Halloween, can the legal system? A hallmark of the legal system is its predictability. Is it less predictable when Halloween is concerned?

One Louisiana appeals court said yes: “On any other evening, presenting a frightening or threatening visage might be a violation of a general duty not to scare others. But on Halloween at trick-or-treat time, that duty is modified. Our society encourages children to transform themselves into witches, demons, and ghosts, and play a game of threatening neighbors into giving them candy.” Bouton v. Allstate Ins. Co., 491 So. 2d 56 (La. Ct. App. 1986) (also noting that the Louisiana legislature has recognized Halloween as a special occasion by exempting it from the statute which prohibits the wearing of masks in public places).

But does this “Halloween rule” apply to haunted houses? All sorts of duties are imposed on property owners to maintain a safe premises. Do these same rules apply when the premises are advertised as having, as their only purpose, to scare visitors? Indeed, many visitors will leave a haunted house disappointed if they were not frightened while there. That being the case, can the visitor of a haunted house now turn around and sue for injuries sustained in the process of getting what he asked (and paid) for?

Just as with the trick-or-treaters in Bouton, haunted houses seem to universally get special treatment at the court house. Based on my research, there have been five reported judicial decisions nationally in which a visitor of a haunted house sought recovery for an injury sustained on account of being scared (a few other cases involve haunted house injuries but not on account of the fright factor). In all five cases the injured patron was not able to recover because of the unique nature of a haunted house. [Here’s the eeriest factor -- all five cases are from the Court of Appeal of Louisiana. What is up with that?] Take a look at the following:

In Mays v. Gretna Athletic Boosters, 668 So. 2d 1207 (La. Ct. App. 1996) the plaintiff, a 10 year old girl, was frightened when a character at a haunted house jumped out at her. She ran – running directly into a visqueen-covered cinder block wall. The court rejected her argument that covering a brick wall with black visqueen in a dark haunted house is an unreasonably dangerous condition which defendant had a duty to prevent plaintiff from running into. “The very nature of a Halloween haunted house is to frighten its patrons. In order to get the proper effect, haunted houses are dark and contain scary and/or shocking exhibits. Patrons in a Halloween haunted house are expected to be surprised, startled and scared by the exhibits but the operator does not have a duty to guard against patrons reacting in bizarre, frightened and unpredictable ways. Operators are duty bound to protect patrons only from unreasonably dangerous conditions, not from every conceivable danger.”

In Bonanno v. Continental Casualty Co., 285 So. 2d 591 (La. Ct. App. 1973) the plaintiff, an 84 year old woman, fell while in the “devil’s den” of a haunted house. A person disguised as the devil was mechanically projected into the room on an overhead track. The court held that the plaintiff obviously assumed the risk of being frightened, jostled and pushed about when she entered the attraction. “Whether Mrs. Bonanno fell as a result of being jostled by the crowd [her version] or in a frightened attempt to get away from the ‘devil’ [defendant’s version] is unimportant. She obviously had knowledge that she could anticipate being confronted by exhibits designed to startle and instill fear. She had to realize that the very nature of the attraction was to cause patrons to react in bizarre, frightened and unpredictable ways. It would be inconsistent in this case for this court to allow plaintiff to recover for damages which resulted from her being frightened, precisely the effect that the ‘Haunted House’ was calculated to produce.”

In Reech v. Optimist Club of Downtown Baton Rouge, 408 So. 2d 399 (La. Ct. App. 1982) the plaintiff was injured when bumped in a chain reaction of bumping started by someone that was frightened in a “scare station” of a haunted house. An actor, in a dark area, was wearing an ‘alien’ mask and had control of a strobe light that he would turn on at various intervals for the purpose of startling individuals when they came into the room. The court, reaching the same assumption of the risk conclusion as in Bonanno, held that the plaintiff could not recover. The court observed that the purpose of a haunted house is to affect people, there were no defects in the flooring and the effect of the scare station would be lost with bright lights.

In Galan v. Covenant House New Orleans, 695 So. 2d 1007 (La. Ct. App. 1997) the plaintiff, after exiting a haunted house and being thanked for coming, was injured when “Jason” (Friday the 13th), hiding behind a visqueen covered fence, started up a chainsaw for purposes of frightening the visitors one last time. The court held that, despite the timing of this fright, the plaintiff could not recover. “It appears to be plaintiff’s contention that this last exhibit, because it was unexpected, created an unreasonable risk of harm. However, the very purpose of a haunted house is to frighten its patrons. … [T]he fact that the plaintiff did not expect this last exhibit does not mandate that the exhibit is unreasonable. Accordingly, we find no breach of duty on the part of defendant by its actions in placing the last exhibit in the visqueen walled alleyway exiting the haunted house because defendant owed no duty to plaintiff to guard against her reactions at any point while in the attraction.” (emphasis in original).

In Durmond v. Billings, 873 So. 2d 872 (La. Ct. App. 2004) the court followed Galan to deny recovery to a plaintiff also injured in a “Jason” chainsaw incident. Plaintiff fell and broke her leg when approached by Jason, holding a chainsaw, in a haunted cornfield maze. “[W]e find that no duty was owed by the Billingses to Mrs. Durmon in this case to warn or protect her from her reaction to being frightened by ‘Jason,’ an experience she expected to have and for which she paid an additional admission fee.” (emphasis in original).

So the moral of this tale is clear. You go to a haunted house expecting to (and paying to) be surprised, startled and scared by the exhibits. You have the right to complain when the experience is not scary. But there is no complaining when you get what you asked for.

I am of course curious why the only judicial decisions to have ever addressed whether a visitor of a haunted house can recover for an injury sustained on account of being scared are from Louisiana. Even if I missed one or two (and I don’t think I have), Louisiana would still have many many multiples of the 2% of such cases that it would across all states evenly. If anyone has any ideas about this – serious or jokey – I’d love to hear them.

If you read only one article in this issue of Coverage Opinions, make it the one about my webinar – “The Definitive Reservation of Rights Checklist: 50 Things That Every ROR Needs.” If you read two, make this one the other.

There have been a lot of cases over the past few years, between Travelers and Centex Homes, involving construction defect coverage. I do not pay attention to them. It seems like a complex story and one that would be futile to understand if you came in late – like trying to understand Breaking Bad by only watching the last episode.

But I took a look at the latest episode of the Travelers -- Centex Homes mini-series and it was a whopper. And I understood it.

In Travelers Indemnity Co. v. Centex Homes, No. 11-3638 (N.D. Calif. Oct. 7, 2015), the court addressed Travelers’s duty to defend Centex, in construction defect litigation, under a policy issued to a Centex contractor.

Travelers acknowledged that it had a duty to defend Centex in certain actions. The issue at hand was whether Travelers had nonetheless breached the duty to defend because it had been late in acknowledging it. Well how late had it been? Not very. But as the court saw it, late is late – no matter how little. And that’s just half the story.

In one situation, a complaint was filed against Centex on April 19, 2011. With a responsive pleading due 30 days after a complaint is filed, Travelers’ duty to defend was not triggered until May 19, 2011. However, Travelers did not accept Centex’s tender until June 1, 2011. This means that, as the court put it, “there were at least 13 days during which Travelers had a duty to defend Centex but did not provide a defense. As a result, Centex had to employ its own counsel.” In another situation, Travelers did not accept Centex’s defense until 67 days after a response pleading to a complaint was required.

As if that’s not enough, the court also held: “A failure to provide counsel or to guarantee the payment of legal fees immediately after an insurer’s duty to defend has been triggered constitutes a breach of the duty to defend, even if the insurer later reimburses the insured [which Travelers had done].” (emphasis added).

What about Travelers’s right to investigate whether it owed a defense, you ask. The court addressed that. “Of course, an insurer is free to conduct an investigation beyond the point at which its duty to defend has been triggered. Such an investigation may lead to facts establishing that there is no possibility of coverage, thereby ending the insurer’s duty to defend. An insurer may not, however, deprive an insured of the security implicit in the duty to defend -- specifically, ‘the right to [immediately] call on the insurer’s superior resources’ as opposed to having to marshal its own resources to mount a defense against a claim that possibly falls within the policy’s coverage.”

As a result of the court’s conclusion that Travelers breached the duty to defend, Travelers lost the right to control Centex’s defense.

Should insures make duty to defend decisions as quickly as possible? Sure. But a court that holds that an insurer breached the duty to defend, despite acknowledging a defense just 13 days after an answer was due, and reimbursing the insured for its defense costs during this gap, unquestionably fails to recognize the realities of certain administrative issues involved in claims handling – especially at a large insurer.

It is unquestionably one of the most challenging issues to confront an insurer – the demand to settle a claim within the insured’s limits of liability. We all know the drill. An insurer has been defending its insured for a while. The case is coming down to the end and trial is on the horizon. The insurer is at the point where it knows as much about the liability and damages issues as it ever will. And with that information, the possibility of a verdict in excess of the limits of liability is known to be a real one. A demand to settle within the insured’s limit of liability, thereby relieving the insured of the risk of personal liability, is made by the plaintiff. All things considered, the applicable state standard, for whether the insurer should accept the limits demand, has been met. In other words, not accepting the demand will saddle the insurer with liability for an excess verdict. [Of course, when there are also coverage issues, the degree of difficulty here goes from multiplication to calculus. But that’s not the issue today.]

But there is another version of this story. Change one fact -- a demand to settle within the insured’s limit of liability is never made. In this situation, insurers generally see themselves as relieved of any risk of exposure for an excess verdict. After all, even though the insured has a legitimate risk of personal liability for a verdict above its policy limit, the insurer’s hands are tied. Right? Without a demand to settle within the insured’s limit of liability, what’s it to do? No matter how much it makes sense to settle the case, the opportunity to do so just isn’t there.

Granted, that’s not always true. In some states, such as Oklahoma, the “duty of good faith and fair dealing requires primary insurers to do more than ... simply not refuse unconditional settlement offers within [its policy] limits. [I]f an insured’s liability is clear and the injuries of a claimant are so severe that a judgment in excess of policy limits is likely, a primary insurer has an affirmative duty to initiate settlement negotiations.” SRM, Inc. v. Great American Insurance Co., No. 14-6160 (10th Cir. Aug. 25, 2015) (citations and internal quotes omitted).

In SRM, Inc. v. Great American, the Tenth Circuit examined, in detail, whether Oklahoma’s rule, applicable to primary policies, requires excess insurers to take that same affirmative step.

The court describes the facts like this: At a rail crossing in rural Oklahoma, “a Union Pacific Railroad train t-boned an SRM dump truck as the truck crossed the tracks in the path of the oncoming train. The collision killed the truck driver and derailed the train causing extensive damage to the train’s engines, its cars, and three of its workers.” The three injured train workers sued Union Pacific, SRM, and SRM’s primary auto insurer. SRM’s excess liability insurer, Great American, “received notice of the claims and monitored the case for potential exposure under its umbrella policy.”

SRM’s personal attorney demanded that the primary and excess insurers tender their respective limits to settle the case. He asserted that the injured train workers’ claims alone would exceed the $6 million in combined liability coverage. The primary insurer was willing to offer its $1 million liability limit to Union Pacific to settle that claim, “or to tender its limit to SRM and Great American for their use in negotiating a settlement with Union Pacific and/or the other claimants. But Great American rejected that approach and urged an aggressive defense.”

After the court rejected SRM’s cross-claim and best defense, personal counsel renewed his demand that Great American tender its $5 million policy limit to settle the case. “He warned that any delay in tendering the entire $6 million available for settlement might make it impossible to settle at a later date. Great American again declined, stating it required additional discovery to properly evaluate the claims and suggesting the claims would be resolved in mediation after discovery was complete.”

Before mediation, the primary insurer’s-retained defense team “revised its estimate of potential exposure to be between $4–4.5 million and $7 million. A Great American-retained attorney estimated economic damages at roughly $8 million, but estimated a jury would award between $2 and $4.65 million. At the mediation, the plaintiffs initially demanded $20 million but later in the day reduced their demand to $6.5 million. Great American countered with $450,000. . . . A week later, the case settled for $6.5 million. The primary insurer paid $1 million; Great American paid $5 million and SRM paid $500,000.

SRM sued Great American. It’s argument was simple: if Great American had investigated the claims, and initiated settlement negotiations by tendering its policy limits earlier in the litigation, the case would have settled within the $6 million policy limits. In other words, SRM would not have been required to pay $500,000 to settle the claims. SRM argued that Great American’s failure to take these actions violated the insurer’s implied duty of good faith and fair dealing.

But the court concluded that Great American had no such duty. It reached its decision based on strong reliance on the language of the Great American policy: “As the district court correctly concluded, the policy was unambiguous: Great American’s contractual duties to investigate, settle, or defend claims against SRM did not kick in until SRM’s primary insurer exhausted its policy limits by actually paying claims.” But, the court observed, this did not happen until the primary insurer paid its respective policy limits to settle the claims against SRM. “At that time, Great American fully discharged its contractual obligations by simultaneously contributing its policy limits toward settling the case.”

SRM sought to overcome this policy-language based argument by resorting to an “implied duty” – “[T]he duty of good faith and fair dealing is . . . independent of policy language, and therefore applies equally at all times to all insurers—whether primary or excess—regardless of when an insurer’s express contractual duties to the insured kick in.” But the court rejected the “implied duty” argument, concluding that the language of the Great American policy was paramount.

When all was said and done, the court held that, at most, an excess insurer’s duties are limited to considering and evaluating a reasonable, within-limits settlement offer.

The SRM court’s decision is entirely justifiable based on the policy language rationale. However, it is not difficult to imagine a court, in a state that imposes an affirmative duty on a primary insurer to initiate settlement negotiations, when an insured’s liability is clear, and a judgment in excess of policy limits is likely, to turn around and impose the same affirmative duty on an excess insurer. A court that imposes this duty on a primary insurer may not have a difficult time concluding that, despite what the policy language may say, the duty of good faith and fair dealing is independent of policy language and, therefore, applies equally to all insurers.

The rates to be paid to the insured’s personal counsel is often-times an issue where there is not a lot of common ground between insurers and insureds. The issue arises in a few of different contexts: an insurer is obligated to defend an insured using independent counsel; an insurer is found to have breached the duty to defend and must now reimburse its insured’s defense costs; and an insured is a prevailing party in coverage litigation and is entitled to recover its attorneys fees.

You know the arguments. The insurer asserts that the rates to be paid to the insured’s counsel should approximate those paid by the insurer to its panel counsel. The insured replies that the panel counsel rates are low, and not the market rate, because they are set with an understanding that, by accepting the rates, the panel lawyers will be in line for repeat assignments.

Of all the scenarios where this issue arises, the insurer surely has the hardest road when it has been found to have breached the duty to defend and must now reimburse its insured’s defense costs. This was the very clear message recently sent by a Wisconsin federal court in Fleet and Farm of Green Bay, Inc. v. United Fire and Casualty Co., 13-1013 (E.D. Wis. Oct. 7, 2015).

The court found that United Fire, having breached its duty to defend, was responsible for paying the attorney’s fees that its insured had incurred in providing its own defense.

United Fire sought to obtain unredacted copies of the insured’s counsel’s bills. Its argument was that it needed unredacted copies to determine whether the fees sought were reasonably and necessarily incurred.

The court denied the insurer’s request – and it wasn’t quiet about it.

First, the court observed that, according to the Wisconsin Supreme Court, damages for breach of the duty to defend include “costs and attorneys fees incurred by the insured in defending the suit.” The Fleet and Farm court observed: “Notably, the [Supreme] court did not modify attorney’s fees with the adjective ‘reasonable,’ which suggests that a reasonableness inquiry is inappropriate.”

The court then added some further clarification of this point. While it offers insurers some protection, concerning the reasonableness of fees, it’s not much:

“Having refused to provide a duty to defend, the insurer also gave up its right to control the defense, as well as the ‘reasonableness’ of its attendant costs. The Plaintiff [insured] is therefore correct that United Fire is not entitled to take a fine-toothed comb over its legal bills, which, after all, it paid in the normal course of business. That said, it is not as though courts must rubber-stamp all such fee requests. Inherent in the nature of damages—any damages—is a limited reasonableness component that derives in part from the injured party’s duty to mitigate. For example, an insured cannot expend millions of dollars in fees in a hundred-thousand-dollar case and expect its bills to be paid without a peep from the insurer. The governing principle mandates that the damages awarded must ‘naturally flow from the breach.’

What this means is that an insurer in a situation like this has a very limited ability to challenge attorney’s fees that were actually incurred. This, no doubt, is not only a nod to the fact that the insurer forfeited its right to control the defense, but also a recognition that fees incurred at arm’s length in a free market are entitled to a certain level of deference that does not tolerate second-guessing. Here, at the time the fees were incurred—i.e., the underlying litigation and in this coverage action—the question of coverage was hardly so clear that the Plaintiff had any incentive to run up the bill or to proceed on the assumption that United Fire would later be on the hook for those fees. The fees were coming out of the Plaintiff's pocket, and like any similarly-situated party, it made judgments about value and quality. Allowing a secondary ‘reasonableness’ inquiry (often years later) would add expense and squander judicial resources.”

I’ll refrain from offering any commentary here. None is needed.

It is the proverbial “damned if you do and damned if you don’t” situation for insurers. An insurer is presented with a policy limits demand to settle for one insured – and it should be accepted based on liability and damages considerations -- but the settlement offered will not secure a release for all insureds.

If the insurer accepts the settlement offer, and secures a release for one insured, then the insured that is not released can be expected to allege that the insurer acted in bad faith, by exhausting the policy without consideration of its interests. If the insurer does not accept the settlement offer, because what’s proposed does not secure a release for all insureds, then the insured who did not obtain the settlement that had been offered to it, can be expected to allege that the insurer acted in bad faith. This insured will invariably argue that the insurer is liable for any resulting excess verdict because the liability and damages justified the insurer accepting the settlement offer.

This conundrum for insurers -- one court calling the issue a Hobson’s choice -- was addressed by a Kansas District Court in Kemp v. Hudgins, No. 12-2739 (D. Kansas Sept. 22, 2015).

Kemp is a very long and detailed opinion. It would take forever to describe it here. Plus, doing so would distract from the point I’m trying to make – which is simply how one court addressed the issue. So I’ll take the easy way out – which is also the best way to describe the case. I’ll quote the court’s conclusion:

“Dairyland [Insurance Company] insists that it would have breached its duty of good faith to Kelley, had it accepted Kemp’s initial settlement demand to release only Hudgins in exchange for the policy limits. Kemp contends that Dairyland would not have breached any duty to Kelley by settling because the policy did not cover negligent entrustment claims, and suggests that Dairyland failed to reasonably investigate its potential liability on such a claim under Kansas law. . .

The Court agrees with Dairyland that its rejection of Kemp’s initial offer to settle without a release of both insureds was not in bad faith because Dairyland reasonably believed it owed a duty of good faith toward both insureds—Hudgins and Kelley—to obtain a release of both. [I]n this case the uncontroverted facts establish that Dairyland quickly offered to pay its policy limits to Kemp to settle the claim. The only point of contention between the parties was whether the policy limits settlement would be in exchange for a release of Hudgins, or of Hudgins and Kelley. Although Kemp did not ask to explicitly reserve his right to pursue a negligent entrustment claim against Kelley, the Court finds that this is a distinction without consequence. Whether or not Kemp explicitly reserved his right to pursue a claim against Kelley, under a negligent entrustment theory or otherwise, his refusal to release Kelley left her open to liability after Dairyland exhausted its policy limits in settling the claims against Hudgins. For the same reasons explained by Judge Marten in Brummett [v. American Standard Insurance Co., No. 04–1114–JTM, 2005 WL 1683610 (D. Kan. July 18, 2005)] the Court finds that Dairyland’s rejection or repudiation of the initial settlement offer was within the bounds of good faith because it did not include a release of both insureds.”


There are not a ton of cases addressing this issue, but it’s not a barren wasteland either. The cases to do so go both ways. And the arguments on both sides are easy to see. Here’s another to add to the mix.

I’ve always liked “use of an auto” cases – be they in the context of coverage under an auto policy or the auto exclusion in a general liability or homeowners policy. It is usually a make or break issue for coverage and the cases have a way of involving peculiar facts. And there’s a reason for that.

After all, since automobiles are designed with a clear purpose in mind, getting to Point B, what’s “use of an auto” shouldn’t be all that hard to figure out. So, if “use of an auto” is being litigated, then, by definition, it’s probably because the claim involves something more than a person simply sitting behind the wheel, motoring down the road and minding their own business. These “use of an auto” cases are also legion. Again, not surprising, since automobiles are so prevalent, on a daily basis, in so many people’s lives.

These are a few of my favorite things when it comes to “use of an auto” cases:

The Liquor Liability Exclusion, contained in commercial general liability policies, has been under attack. In general, some courts have held that the exclusion does not apply to the failure to prevent the excluded conduct. In other words, say a bar patron is served alcohol, gets in his car and causes an accident that injures someone. This is conduct that is clearly excluded under the CGL policy’s Liquor Liability Exclusion. However, some courts have held that the exclusion does not apply to a claim that the insured’s negligent supervision or hiring or training of others caused the accident.

In an attempt to prevent such interpretation, the Liquor Liability Exclusion, contained in the 2013 version of ISO’s CG 00 01 form, was amended to state that it applies “even if the claims against any insured allege negligence or other wrongdoing in: The supervision, hiring, employment, training, or monitoring of others by that insured; or Providing or failing to provide transportation with respect to any person that may be under the influence of alcohol, if the ‘occurrence’ which caused the ‘bodily injury’ or ‘property damage’” is otherwise excluded.

[Of course, ISO having made this change, the door is now open to the policyholder argument that any Liquor Liability Exclusion, that does not contain this additional broadening language, provides coverage for “failure to prevent” claims. Otherwise, as the old policyholder saw goes, why was there a need to change the form?]

In Capitol Specialty Insurance Corporation v. PJD Entertainment of Worcester, No. 14-40086 (D. Mass. Sept. 1, 2015), a Massachusetts federal court did not need any new policy language to hold that a Liquor Liability Exclusion precluded coverage for a “failure to prevent” claim.

Kailee Higgins, age 20, was working as a dancer at Centerfolds. She was encouraged to consume excessive amounts of alcohol. While intoxicated and obviously impaired an employee of Centerfolds escorted her to her vehicle. Higgins was involved in an accident and suffered severe injuries, allegedly due to Centerfolds’s service of alcohol and failure to take reasonable precautions to prevent her from driving. Higgins and Centerfolds reached a settlement in the amount of $7.5 million. Higgins agreed to hold Centerfolds harmless for all but $50,000. Centerfolds assigned all rights it has against its insurer, Capitol Specialty, to Higgins.

A CGL policy issued by Capitol Specialty was subject to a $1 million limit. The Liquor Liability Policy, which Capitol Specialty acknowledged provided coverage, was subject to a $300,000 limit. At issue was the applicability of the Liquor Liability Exclusion contained in the CGL Policy.

The Liquor Liability Exclusion did not contain any specific language addressing an insured’s “failure to prevent.” Nonetheless, the court, calling the exclusion straightforward, held that it applied:

“Coverage does not apply to ‘bodily injury . . . for which any insured may be held liable by reason of: (1) [c]ausing or contributing to the intoxication of any person; (2) [t]he furnishing of alcoholic beverages to a person under the legal drinking age or under the influence of alcohol; or (3) [a]ny statute, ordinance, or regulation relating to the sale, gift, distribution, or use of alcoholic beverages.’ The phrase ‘by reason of’ is unambiguous; it ‘means ‘because of,’ and thus necessitates an analysis at least approximating a ‘but-for’ causation test.’ . . . Based on the allegations of the state court complaint, there is no question that Higgins’ injuries had their genesis in Centerfolds’ actions of serving and encouraging her to consume excessive amounts of alcohol. Without that conduct of Centerfolds’ management and staff, Higgins would not have become intoxicated, she would not have driven home impaired, and she would not have suffered bodily injuries for which Centerfolds is liable. Therefore, coverage is precluded because Centerfolds’ liability exists ‘by reason of causing or contributing to the intoxication of’ Higgins.”

The court was confronted with a “failure to prevent” argument but put a cork in it (at least under the facts before it; which is a significant point, as the court alluded to): “The Court rejects Defendants’ alternative interpretation. … Defendants claim that Higgins’ injuries were not caused by the service of alcohol, but by the negligent failure to prevent impaired driving. (citations omitted). Defendants assert that the words ‘by reason of’ must be construed narrowly, and require that the excluded conduct correspond with the precise theory of liability in the underlying action. Essentially, Defendants argue that because ‘negligent failure to prevent impaired driving’ is not specifically enumerated in the exclusion, coverage is not precluded. To be sure, this might be a different case if Higgins was intoxicated when she arrived at Centerfolds, did not drink while she was there, and Centerfolds allowed her to drive away while still obviously impaired. But those are not the facts of the underlying complaint, which alleges in unequivocal terms that Centerfolds is liable for its conduct in serving and encouraging Higgins to drink in excess.”

While the absence of “failure to prevent” language, in the Liquor Liability Exclusion, did not preclude its applicability in PJD Entertainment, the new version of ISO’s exclusion is undoubtedly going to have an impact in liquor liability claims, under CGL policies, going forward.