M&M Bar Corp v. Northfield Insurance Company, 1:16-cv-01145

Background

M&M Bar Corp. (dba Mr. Peabody’s Pub) held a liability policy from Northfield Insurance covering bodily-injury claims, subject to several exclusions.
On December 20, 2014, patron Mark Farrar was allegedly struck by another patron, Sean Broz, at M&M’s premises; Farrar sued Broz and M&M in state court asserting (1) a dram shop claim under O.R.C. § 4301.22 for serving an intoxicated person and (2) a negligent security claim for failing to provide adequate security.
Northfield refused to defend or indemnify M&M, contending both claims are excluded by the policy’s Liquor Liability and Battery (assault/battery) exclusions.
Northfield filed a declaratory judgment action in federal court seeking a declaration that it owes no defense or indemnity; M&M cross-moved for judgment on the pleadings.
The parties agreed Ohio law governs interpretation of the policy; the court reviewed the complaint allegations against M&M to determine whether coverage was potentially implicated.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the dram shop claim is covered	Farrar’s dram shop allegation may create potential coverage because it pleads negligence in service	Policy’s Liquor Liability exclusion expressly bars coverage for injury caused by serving an intoxicated person or violations of alcohol statutes	Exclusion applies; dram shop claim excluded — no duty to defend or indemnify
Whether the negligent security claim is covered	Negligent security allegation alleges negligence, not intentional battery, so it could fall within coverage	Policy defines "battery" to include offensive or painful physical contact, whether intentional or not, and excludes bodily injury arising from such battery	Court holds complaint alleges painful/unpleasant contact (strike causing permanent injury) therefore falls within the Battery exclusion — claim excluded
Proper interpretation rules and duty to defend standard	M&M argues exclusions should be construed in insured’s favor where ambiguous	Northfield relies on clear policy language and defined terms to show exclusions unambiguously apply	Court applies Ohio contract/insurance canons and Twombly/Iqbal pleading standards; finds policy language unambiguous and exclusions apply
Whether Northfield must defend/indemnify or whether declaratory relief is inappropriate	Farrar sought to intervene (and M&M sought coverage)	Northfield sought declaratory judgment that there is no coverage	Court grants Northfield’s judgment on the pleadings, denies M&M’s cross-motion, and denies Farrar’s motion to intervene

Key Cases Cited

Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (pleading must state a plausible claim)
Ashcroft v. Iqbal, 556 U.S. 662 (Twombly standard applied to complaints)
Roger Miller Music, Inc. v. Sony/ATV Publishing, LLC, 477 F.3d 383 (12(c) standard same as 12(b)(6))
Barany-Snyder v. Weiner, 539 F.3d 327 (court may consider exhibits attached to complaint)
Brillhart v. Excess Ins. Co., 316 U.S. 491 (Declaratory Judgment Act discretionary)
Ohio Gov’t. Risk Mgt. Plan v. Harrison, 115 Ohio St.3d 241 (insurer must defend if complaint possibly falls within coverage)
Owens-Illinois, Inc. v. Aetna Cas. & Sur. Co., 990 F.2d 865 (undefined policy terms given ordinary meaning under Ohio law)