Sentry Select Insurance Company v. Ruiz, No. 16-376 (W.D. Tex. June 20, 2018) involves an obscure issue. You can probably count on one hand the number of coverage professionals who have ever encountered it. But it’s interesting. So it’s here.

At issue is coverage for an automobile accident. But this was no red light-green line at the corner of Elm and Main. The story goes like this. Rudolph Mazda, in El Paso, Texas, was keen on selling cars. The sales people arrived at 9 a.m. and the dealership provided lunch on its premises to keep them in place to sell. Sales people were expected to stay as late as needed – sometimes until 10 p.m.

One day in December 2013, Marcelo Flores, a manager of Rudolph Mazda, sent Christian Ruiz, a salesman, to the store to purchase beer. This was done during working hours. The beer was placed in the Rudolph Mazda refrigerator and consumed that night, after work, and on the dealership’s premises, by Ruiz, Flores and another manager, Lynn Crawford.

After consuming beer, Ruiz struck salesperson Irma Villegas with his vehicle while she was walking in the Rudolph Mazda parking lot. Villegas suffered various injuries and filed suit against Ruiz, Flores, Crawford and Rudolph Mazda, asserting a variety of causes of action.

At issue was the availability of coverage for Rudolph Mazda under a Sentry Insurance garage liability policy, which provided protection for bodily injury caused by an accident and resulting from garage operations involving the ownership, maintenance or use of any auto. The policy also contained a broadened coverage endorsement, where the insurer agreed to “pay all sums the insured legally must pay as damages because of ‘bodily injury’ . . . arising out of the giving or serving of alcoholic beverages at functions incidental to your garage business provided you are not engaged in the business of manufacturing, distributing, selling or serving of alcoholic beverages.” (emphasis added).

Sentry and Rudolph Mazda disputed whether the beer consumption, on the night in question, fell within the scope of the undefined term “function” as used in the liquor coverage endorsement. Rudolph Mazda argued that any social gathering can be a “function.” Sentry did not see the term so broadly, arguing that the provision “only applies to company functions such as company Christmas parties, company picnics, etc.” A gathering of a few employees, who stay after work to socialize, is not a function, so said Sentry.

But the court was not persuaded that a “function” cannot be an after-work gathering of a few employees for beer consumption. The court’s rationale was simple -- there was nothing in the policy that evidenced an intent to exclude a particular type of social gathering from the meaning of the term “function.”

It is a curious decision. The court noted that, to determine the meaning of an undefined term, it is appropriate, as a starting point, to examine the dictionary definition. And it did so, which revealed that several dictionaries defined “function” as an official or formal gathering. There is little that is official or formal about a few co-workers having a brewsky after work. Even if “an intent to exclude coverage must be expressed in clear and unambiguous language,” isn’t that what the insurer did by using a term that has a clearly defined meaning?

[In case you are wondering, the court concluded that the Employer’s Liability exclusion did not apply as Villegas was no longer in the course of her employment when the injury occurred. Rather, she had ended her work and was in the process of leaving.]