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Nationwide Mutual Insurance Co. v. Veterans of Foreign Wars of United States

United States District Court, E.D. Kentucky, Southern Division, London

March 27, 2017



          David L Bunnina United States District Judge.


         Plaintiff Nationwide Mutual Insurance Company (“Nationwide”) brought this action pursuant to the Declaratory Judgment Act, 28 U.S.C. § 2201, against Defendants Pierce Dant Hamblin Post No. 3167 Veterans of Foreign Wars of the Unites States, Incorporated (“VFW”) and Margie Woodruff, as administratrix of the Estate of Richard Perkins. Nationwide seeks a declaration that it has no obligation to defend or indemnify Defendant VFW in an underlying lawsuit filed by Woodruff. (Doc. # 1). Before reaching the substantive issue, the Court must consider whether to exercise its discretionary jurisdiction under the Declaratory Judgment Act (“Section 2201"). To that end, Defendants Woodruff and VFW have filed Motions to Dismiss, or in the alternative, to abstain.[1] (Docs. # 8 and 12). Having reviewed the parties' briefings, and carefully considering the issues in this case, the Court finds it appropriate to decline jurisdiction in this case pursuant to Section 2201. Accordingly, Nationwide's Complaint will be dismissed without prejudice.


         The Pierce Dant Hamblin Post No. 3167 VFW is a non-profit corporation located in Williamsburg, Kentucky. (Doc. # 8-3 at ¶ 3). On or about April 13, 2016, Adam Childress was served alcoholic beverages while at the VFW. Id. at ¶ 6. Despite being intoxicated, Childress attempted to drive home from the VFW. Id. at ¶ 10. On route home, Childress swerved, and his vehicle struck a pedestrian, Richard Perkins. Id. Perkins died as a result of his injuries. Id.

         Woodruff, as administratrix of Perkins's estate, sued both Childress and the VFW in Whitley County Circuit Court. Id. Woodruff brought negligence claims against the VFW pursuant to Kentucky's “dram shop” statute, KRS § 413.241. Id. at ¶¶ 20-26. Specifically, Woodruff alleges that VFW negligently trained and/or supervised its members, employees, or agents who sold and/or served alcohol to Childress on April 13, 2016, and that the agents were negligent because they served alcohol to Childress when he was visibly intoxicated. Id.

         The VFW has multiple insurance policies through Nationwide. (Doc. # 1 at ¶ 25). Nationwide is defending VFW in the underlying action pursuant to a Commercial General Liability (“CGL”) policy and Liquor Liability policy. Id. at ¶¶ 3-4. The defense Nationwide is providing to VFW in the underlying action is subject to a reservation of rights letter dated May 2, 2016. Id. at ¶ 36.

         Nationwide filed the instant declaratory judgment action on July 18, 2016. Id. According to the complaint, Nationwide does not have a duty to defend or indemnify VFW for any claims asserted in the underlying action. Id. First, Nationwide argues that the “Liquor Liability” exclusion contained in the CGL applies to the underlying claims, thus precluding coverage. Id. at ¶ 59. Next, Nationwide claims that the “Liquor License Not in Effect” exclusion prohibits coverage under the Liquor Liability Coverage Form.[2] Id. at ¶ 66. Finally, Nationwide contends that VFW made a material misrepresentation in its application for Liquor Liability Coverage because it failed to indicate that it did not possess a valid liquor license. Id. ¶¶ 47-50.

         Nationwide's position in this matter implicates the following provisions and definitions within the CGL policy:

Section I - Coverages ...
2. Exclusions
This insurance does not apply to:
a. 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.
c. Liquor Liability “Bodily injury” or “property damage” for which any insured may be held liable by reason of:
(1) Causing or contributing to the intoxication of any person;
(2) The furnishing of alcoholic beverages to a person under the legal drinking age or under the influence of alcohol; or
(3) Any statute, ordinance or regulation relating to the sale, gift, distribution or use of alcoholic beverage.
This exclusion applies even if the claims against any insured allege negligence or other wrongdoing in:
(a) The supervision, hiring, employment, training or monitoring of others by that insured; or
(b) 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” involved that which is described in Paragraph (1), (2) or (3) above.
However, this exclusion applies only if you are in the business of manufacturing, distributing, selling, serving or furnishing alcoholic beverages. For purposes of this exclusion, permitting a person to bring alcoholic beverages on your premises, for consumption on your premises, whether or not a fee is charged or a license is required for such activity, is not by itself considered the business of selling, serving or furnishing alcoholic beverages.

(Doc. # 1-2 at 20). Nationwide's position also implicates the following provisions from the Liquor ...

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