Refusing to succumb to pressure by an insured to find an ambiguity in an exclusion to a commercial general liability (CGL) policy where none existed, the Illinois Appellate Court, First District in Phusion Projects, Inc. v. Selective Ins. Co.,
2015 IL App (1st) 150172 (Ill. App. Ct. 1st Dist. 2015) confirmed that plainly written policy exclusions will be enforced.
In Phusion Projects,
the manufacturer of an alcoholic beverage containing high levels of alcohol and other stimulants sought coverage from its CGL insurer for a series of underlying personal injury and wrongful death lawsuits involving injuries allegedly arising from its beverage. However, the policy issued to the manufacturer contained a liquor liability exclusion that barred coverage for “bodily injury… for which any insured may be held liable by reason of … causing or contributing to the intoxication of any person.” The exclusion stated that it applied “only if you are in the business of manufacturing, distributing, selling, serving or furnishing alcoholic beverages.”
In seeking coverage, the insured made various arguments regarding the applicability of the liquor liability exclusion to the underlying liability claims, including that the exclusion did not apply to manufacturers, since a manufacturer does not cause or contribute to intoxication. The Appellate Court rejected this argument, holding that the plain language of the exclusion made clear that it applied to those companies in the business of manufacturing alcoholic beverages. With respect to the insured’s claim that a manufacturer does not actually cause or contribute to intoxication, the Appellate Court held that such an argument may be an appropriate defense to the liability claims against the insured, but was not relevant to the issue of the insurer’s duty to defend or indemnify the insured for the liability claims.
The insured also contended that the insurer had a duty to defend it based on what the insured called the “sole proximate cause rule,” arguing that intoxication was not the sole and proximate cause of the injuries asserted in the underlying lawsuits. Although most of the complaints alleged that the stimulants added to the insured’s beverage masked or added an additional element to the intoxication, the Appellate Court found that under Illinois law, to get around the liquor liability exclusion, the underlying complaints must allege facts that are independent from “causing or contributing to the intoxication of any person.” The Appellate Court further held that the combination of the stimulants and the alcohol did not negate the fact that the alcohol was alleged to have caused the injuries and did “not have a legal effect on the applicability of the liquor liability exclusion.”
Broad exclusions like the one at issue in Phusion Projects
can often be interpreted as being ambiguous. What is noteworthy about this decision is that the Appellate Court appropriately relied on the broad scope of the exclusion, and following Illinois precedent, made clear that courts should not “strain to find ambiguity in an insurance policy where none exists.” While supposed ambiguity continues to be a strong weapon against insurers, decisions like this one confirm that the doctrine of ambiguity is not boundless and should be limited only to those cases in which a true ambiguity in an insurer’s policy exists.