Earlier this week we ran an article on liquor liability coverage'which elicited many questions regarding the availability of coverage for assault and battery'in the commercial general liability (CGL) and liquor liability policies. Below'are parts of an article I ran last year along with additional information related specifically to Insurance Services Office's (ISO's)'liquor liability'policy wording.

Background Story

My wife arranged a "surprise" birthday dinner/party to celebrate my fortieth year. As dinner wound down, several restaurant employees came around the corner with sombreros aiming to put one on my head and sing me their version of "Happy Birthday." I had been through all this before so I knew what to expect – at least I thought I did.

There must have been 12 of them (well, actually, only two); one put the hat on my head and the second HITme in the face with a whipped cream pie (it's true, my wife has the pictures on her FaceBook site). I was attacked in broad daylight in front of several witnesses, none of whom sprang to my aid (mostly they just laughed at me).

As the initial shock dissipated and I wiped off all the whipped cream I could reach; I began to think about the insurance implications of what just happened (yes, even in a time of shock I think insurance).

Legal Definitions Related to the Attack

Before I had my face fully whipped cream-free, I looked at the waitress and jokingly said, "You do realize that was assault and/or battery." She did not respond, but these terms have distinct legal meanings of which the restaurant's management now needs to be aware:

  • Assault is not actual bodily contact, only the threat of bodily injury by force. Such threat is intentional and unlawfully directed towards another person such that the other party has a reasonable fear that injury is likely to occur. The apparent ability to carry out such a threat must also exist. A person pointing a gun at someone and telling them, "I'm going to kill you," would amply qualify as assault (in this case it's with a deadly weapon). Battery is actual physical touching and does not equate to assault.
  • Battery (according to www.expertlaw.com) is actual physical contact with another individual against that person's will. Such contact does not have to result in physical injury to be considered battery. Such contact is not limited to physical touching or beating but can also refer to the physical restraint of a person. Spitting on a person, although not likely to cause injury, can qualify as battery. Battery can exist on its own without assault; an example would be someone just grabbing another person and beating them without provocation or warning.

Based on the legal definition, I was a victim of battery. However, the amount of damages which I may be able to recover is minimal since I was not hurt (other than a little bit of my ego). But what if the person has an allergy or was hit harder than expected resulting in a broken nose or gouged eye – would the restaurant's general liability policy respond; and how?

How the CGL Responds

Questions regularly arise as to whether the commercial general liability (CGL) policy responds to claims of assault and battery. The unendorsed CGL contains no specific exclusion for such actions, but coverage may depend on who perpetrates the assault or battery.

The CGL promises to pay all sums the insured is legally obligated to pay as a result of "bodily injury" or "property damage" suffered by a third party. Legal obligation can arise out of contract or tort. A tort relates to the insured's negligence in that if the insured is somehow negligent and a third party is injured as a result of that negligence, the CGL pays.

Relating this to assault and battery, if a customer is a victim of assault and/or battery and the insured is somehow held liable for the actions (did not keep the premises safe, allowed an argument to escalate, did not protect the customer, etc), the CGL responds and pays the claim subject to policy provisions and exclusions. If, however, the insured is found not liable for the injury, then the policy is not required to respond.

But the attack on me was different. I was technically and factually a victim of battery and the restaurant was undoubtedly liable – because they did it. The last phrase seems to preclude coverage for the incident, leaving the restaurant on its own for any injuries that might have resulted; or does it?

Certainly the expected and intended injury exclusion (2.a.) would act to exclude coverage for this incident, wouldn't it? However, when each word is assigned its everyday meaning and the exclusionary wording viewed in its entirety, it does NOT necessarily exclude coverage for the restaurant's attack on me. The exclusion reads:

'Expected Or Intended Injury
"Bodily injury" or "property damage" expected or intended from the standpoint of the insured. This exclusion does not apply to "bodily injury" resulting from the use of reasonable force to protect persons or property.

So, while the action was intentional, any injury that might have occurred was not intended, or even expected. Would the restaurant or anyone else reasonably expect someone to be injured by a putting of a pie in their face? Further, do they intend to hurt anyone with a whipped cream pie? Not likely on either.

For the exclusion to apply, the injury has to be expected or intended – not the action. There is no intentional act exclusion in the CGL, so coverage appears to remain intact and available to respond.

Liquor and Assault and Battery

ISO's Liquor Liability Coverage Form (CG 00 33 or CG 00 34) applies essentially the same exclusionary wording regarding expected or intended injuries as does the CGL. To be excluded, the "injury" (which is defined to include "bodily injury" and "property damage") must be expected or intended from the standpoint of the insured. There is no separate assault and battery exclusion within these ISO endorsements, although this may differ in proprietary forms.

But what about bouncers who use unreasonable force when removing a customer, or simply lose their temper and beat an unruly inebriated (drunk) customer? What about injuries arising out of one customer attacking another one? Would such actions or inactions fall under the "expected and intended injury" exclusion in one or all forms (the CGL and/or two Liquor Liability forms) such as to preclude coverage for the establishment (the named insured)?

Questions of fact regarding the insured's responses to the actions or inactions listed above will likely involve, and be debated in, the court, including: 1) did the named insured's establishment have a history of such rough behavior (or was it condoned); 2) did the owners and management have guidelines on how to remove unruly patrons from the establishment (and were they followed); 3) were records of unusual incidents kept detailing any unusual or extreme measures required; 4) what measures are taken to manage conflicts between customers; and other such questions.

Depending on the facts, the actions/inactions may or may not be considered "expected or intended from the standpoint of the insured." If not expected or intended, there is no exclusion and coverage applies. Additionally, the concept of "Separation of Insureds" also plays a part in the availability of coverage in situations of apparent expected or intended injury.

"Separation of Insureds"

ISO's CGL and Liquor Liability coverage forms apply the "Separation of Insureds" condition to liability claims. Essentially this condition states that each insured is treated as a separate insured, thus the actions of the named insured, or any other insured listed in "Who is an Insured," does not preclude coverage for any or all other "insureds."

Simply put, because the bouncer (an "employee" and thus an "insured" by definition) may have expected or intended to injure the customer does not mean the named insured establishment did. If found in court that the named insured expressly forbids the use of unreasonable or unnecessary force and takes the appropriate action when such rule is broken, they (the named insured) should be protected by either form (depending on the underlying cause). The bouncer would be excluded from coverage because he should have reasonably expected or did in fact intend for the injury to occur.

Just because the actions of one "insured" falls under an exclusion does not mean that that exclusion applies to all "insureds" (as defined by the policy). The named insured may be covered even when an "automatic insured" is excluded.

"Mental Anguish" from Assault and Battery

Although there was no apparent intent to do physical harm, such attack could cause an intense psychological reaction in some people. It may bring back memories of some awful event or create uneasiness in a person's belief in their ability to protect themselves.

I told my wife I was having dreams of being attached by a can of whipped cream and was unable to close my eyes and sleep because of the fear. This lack of sleep may lead to sleep deprivation, reduced mental capacity and job performance and ultimately the loss of my job. And my daughter, who saw the attack, is suffering from post-traumatic stress disorder even though she was not in the zone of danger.

Now, while I'm joking about my dreams and my daughter's stress (she was among those laughing), some people do suffer or claim to suffer such mental anguish "injuries." Defending these claims and paying the loss if the jury finds in favor of the plaintiff could be quite expensive; and there is NO specific coverage in the unendorsed CGL for claims of injury from "mental anguish."

"Bodily injury" is defined as bodily injury, sickness or disease sustained by a person, including death resulting from any of these at any time. Nowhere is coverage for "mental anguish" provided under the "Bodily Injury and Property Damage" coverage section (Coverage A).

Neither does the definition of "Personal Injury" contemplate "mental anguish" losses. Coverage B, "Personal and Advertising Injury," also fails to provide any protection to the insured.

Insurers that either: 1) do not subscribe to ISO wording (in whole or in part); or 2) have proprietary endorsements may allow "bodily injury" to be redefined by endorsement to include "mental anguish." But many of those endorsements only extend coverage to include "mental anguish" CASUED by "bodily injury;" not simply "mental anguish" as its own cause of injury.

However, some state courts have chosen to broaden the definition of "bodily injury" to include "mental anguish." These courts differ on the breadth of the inclusion as some require that the supposed "mental anguish" be the result of actual injury; while a few will allow "mental anguish" to stand alone as its own injury without the need for actual bodily harm or injury.

Depending on the state, protection from charges of "mental anguish" may be excluded under most CGL forms. Most likely any judgment or settlement arising out of such charges may have to be paid by the insured.

Proprietary Forms

ISO policy forms are referred to and quoted in this article. Proprietary forms may differ in their wording and may even contain or be endorsed to include an assault and battery exclusion.

Non-ISO policy forms and endorsements must be closely reviewed to ascertain exclusionary breadth related to assault and battery. Broadening endorsements or the removal of narrowing endorsements may be necessary to provide insureds with the needed coverage (as close as possible to standard wording).