Funky 544 v. Houston Specialty Ins, 21-30310

At Funky 544, a patron under 21 (Ronesha Kelly) stabbed two women, Shakeva Soniat and Serena Tribbit, at the bar.
Soniat and Tribbit sued Funky 544 in Louisiana state court for negligence, alleging the bar’s failures (e.g., to ID patrons / prevent underage drinking) led to their knife injuries.
Funky 544’s insurer, Houston Specialty, declined coverage months after notice; Funky 544 did not defend the state suit, a default judgment was entered, and plaintiffs recovered a money judgment.
Funky 544 sued Houston Specialty in federal court (E.D. La.) claiming breach and duty to defend; Houston Specialty moved for summary judgment relying on the policy’s weapons exclusion covering injuries arising out of weapons (including knives).
The district court concluded the weapons exclusion unambiguously barred coverage for the claims and granted summary judgment for Houston Specialty.
The Fifth Circuit affirmed: because each negligence claim was tied to the stabbing, the exclusion applied and Houston Specialty had no duty to defend.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether Houston Specialty had a duty to defend Funky 544 against the state negligence suit	The exclusion may cover some claims but does not reach all negligence theories; insurer still owes defense for claims not squarely within exclusion	The weapons exclusion unambiguously covers the plaintiffs’ negligence claims because each claim stems from injury by a knife	No duty to defend; exclusion applies to all claims tied to the stabbing
Interpretation of “arising out of” and scope of weapons exclusion	“Arising out of” should be read narrowly so some negligence claims remain separate from the weapon use	“Arising out of” is plain and unambiguous; injuries resulting from the weapon are excluded unless entirely separate and distinct	“Arising out of” exclusion is unambiguous; injuries from the stabbing are excluded unless wholly separate — here they were not

Meloy v. Conoco, Inc., 504 So. 2d 833 (La. 1987) (insurer must defend if pleadings disclose a possibility of liability under the policy)
Cadwallader v. Allstate Ins. Co., 848 So. 2d 577 (La. 2003) (insurance policies interpreted by plain and ordinary meaning)
Guste v. Lirette, 251 So. 3d 1126 (La. Ct. App. 2018) (exclusion for injuries arising from assault/battery applies unless injuries are separate and distinct)
Foquet v. Daiquiris & Creams of Mandeville, L.L.C., 49 So. 3d 44 (La. Ct. App. 2010) (bar stabbing case where weapons exclusion barred coverage because injuries were related solely to the stabbing)
Delta Seaboard Well Serv’s, Inc. v. Am. Int’l Specialty Lines Ins. Co., 602 F.3d 340 (5th Cir. 2010) (contract interpretation and exclusions reviewed de novo)
Federal Ins. Co. v. Singing River Health Sys., 850 F.3d 187 (5th Cir. 2017) (summary judgment standard cited for review)
Erie R.R. Co. v. Tompkins, 304 U.S. 64 (U.S. 1938) (federal courts in diversity apply state substantive law)