Cheaters, Inc. v. United National Insurance
41 A.3d 637
R.I.2012Background
- Cheaters, Inc. and Cheaters Holding Corp. (Holding Corp.) appealed a Superior Court summary judgment in favor of United National Insurance Co.
- Two underlying actions alleged Cheaters and Holding Corp. served alcohol to a visibly intoxicated patron who later caused a fatal South Boston accident.
- United National issued a policy naming Cheaters as insured and named Holding Corp. as an additional insured via an Additional Insured Endorsement.
- The policy includes an On-Premises Endorsement limiting coverage to on-premises bodily injury or property damage at 245 Aliens Avenue, Providence, RI.
- The policy also contains an insured contract exclusion for contractual liability, but expands coverage for liability assumed in an insured contract; the indemnification contract between Cheaters and Holding Corp. is such an insured contract.
- Cheaters and Holding Corp. sought defense and indemnification under the policy; United National denied coverage based on the On-Premises Endorsement and the liquor liability exclusion.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does the On-Premises Endorsement apply to the insured contract between Cheaters and Holding Corp.? | Cheaters contends endorsement is ambiguous and could cover non-premises liability. | United National argues endorsement is clear and limits coverage to on-premises injuries. | Yes; endorsement is unambiguous and applies to the insured contract, barring coverage for the underlying actions. |
| Does the Additional Insured Endorsement become illusory if the On-Premises Endorsement applies? | Holding Corp. argues it gains no broader protection than indemnification, making the endorsement illusory. | Endorsement adds insureds and does not broaden the insured's own coverage. | No; an additional insured enjoys the policy's benefits and is subject to its exclusions; endorsement is not illusory. |
| Is the On-Premises Endorsement invalid as against public policy? | Endorsement would unduly restrict reasonable coverage expectations and undermine indemnity. | Public policy does not bar the endorsement. | Rejected; endorsement withstands public policy challenge. |
| Should the liquor liability exclusion control given the On-Premises Endorsement? | Liquor exclusion should preclude coverage for Holding Corp. liability. | -liquor exclusion concerns were not reached because On-Premises applies; exclusion would be considered if needed. | Not reached; not necessary to decide given On-Premises Endorsement result. |
Key Cases Cited
- Papudesu v. Medical Malpractice Joint Underwriting Association of Rhode Island, 18 A.3d 495 (R.I. 2011) (contract ambiguity determined as a matter of law; plain meaning governs)
- Bliss Mine Road Condominium Association v. Nationwide Property and Casualty Insurance Co., 11 A.3d 1078 (R.I. 2010) (interpretation of unambiguous contract terms; contract language read in context)
- Beacon Mutual Insurance Co. v. Spino Brothers, Inc., 11 A.3d 645 (R.I. 2011) (ambiguity and contract interpretation; limits of coverage)
- Aetna Casualty & Surety Co. v. Sullivan, 633 A.2d 684 (R.I. 1993) (contract interpretation; insurers' duties when terms are clear)
- Weedo v. Stone-E-Brick, Inc., 81 N.J. 233, 405 A.2d 795 (N.J. 1979) (exclusion clauses subtract from coverage; readings must be sequential)
- Great West Casualty Co. v. Mayorga, 342 F.3d 816 (7th Cir. 2003) (endorsement limitations; add insureds rather than alter contract)