Auto-Owners Ins. Co. v. Seils

310 Mich.App. 132

871 N.W.2d 530

AUTO–OWNERS INSURANCE COMPANY

v.SEILS.

Seils

v.Pink.

Docket Nos. 315891

315901

316511.

Court of Appeals of Michigan.

Submitted Oct. 15, 2014, at Detroit.

Decided March 26, 2015, at 9:15 a.m.

Willingham & Coté, P.C., East Lansing (by Kimberlee A. Hillock, John A. Yeager, and Frederick M. Baker ), for Auto–Owners Insurance Company.

Peter J. Parks for Chad Seils.

Cummings, McClorey, Davis & Acho, P.L.C., Southfield (by Douglas J. Curlew ), for Olympia Entertainment, Inc., in Docket No. 315891.

Cummings, McClorey, Davis & Acho, P.L.C., Lindsey J. Kaczmarek (by T. Joseph Seward and Lindsey J. Kaczmarek ), for Olympia Entertainment, Inc., in Docket No. 316511.

David Franks, P.C. (by David J. Franks, Southfield), for Fraternal Order of Police Associates, Grosse Pointe Lodge 102 in Docket No. 315891.

Secrest Wardle, Troy, (by Drew W. Broaddus and Thomas J. Azoni ) for Fraternal Order of Police Associates, Grosse Pointe Lodge 102 in Docket No. 315901.

Before: BOONSTRA, P.J., and MARKEY and KIRSTEN FRANK KELLY, JJ.

PER CURIAM.

These cases are consolidated for purposes of appeal. In Docket No. 315891, Auto–Owners Insurance Company appeals by right the trial court's declaratory ruling that the commercial general-liability policy (CGL) it issued to defendant Fraternal Order of Police Associates, Grosse Pointe Lodge 102 (FOPA) provided both dramshop and contractual-liability coverage for an incident in which an allegedly intoxicated person (AIP) murdered and severely injured several people. In Docket No. 315901, this Court granted the FOPA's application for leave to appeal the trial court's denial of its motion for summary disposition of the underlying dramshop action.

Similarly, in Docket No. 316511, defendant Olympia Entertainment, Inc., appeals by leave granted the trial court's denial of its motion for summary disposition with respect to the same dramshop action. For the reasons discussed in this opinion, we conclude that the trial court did not err in its ruling in Docket No. 315891 but that in Docket No. 315901 and Docket No. 316511 it should have granted summary disposition to those defendants regarding the dramshop action because the plaintiff in that case, Chad Seils, cannot establish proximate cause. MCL 436.1801(2) and (3).

I. SUMMARY OF PERTINENT FACTS AND PROCEEDINGS

A. DOCKET NO. 315891

According to the testimony of Robert Estabrook, its treasurer and one of its incorporators, the FOPA is a nonprofit corporation organized for the purpose of supporting the police and various charities such as Special Olympics and other community charities. The FOPA also directly supports local police by doing things like buying GPS units for detectives' cars and bulletproof vests for new officers. Its articles of incorporation as a domestic nonprofit corporation state that in addition to "inculcat[ing] loyalty and allegiance" to the Constitution and the nation, the FOPA's purpose is to "join together fraternally ... to promote and foster the impartial enforcement of law and order; to assist in all reasonable and ethical ways our parent lodge, Fraternal Order of Police, Grosse Pointe Lodge No. 102, in their endeavor to support and assist their members and family...."

To raise money for its stated purposes, the FOPA would each year obtain a temporary license from the Liquor Control Commission to staff a beer tent at various community special events and, in particular, staff a beer tent at an annual three-day event known as the Detroit Hoedown (the Hoedown). It is undisputed that this event had been the FOPA's main fundraiser for 20 years preceding the events of May 2010. CBS Radio and Live Nation Entertainment promoted the Hoedown, and concessions were run by a succession of event managers, ending in 2010 with Olympia. For the 2010 Hoedown, Olympia and the FOPA entered into a concession agreement. Twelve other civic groups also signed concession agreements as "sub-licensees" to staff beer tents at the Hoedown under the auspices of the FOPA's special liquor license. Estabrook testified that Olympia recruited, trained, and supervised the other civic groups and that the FOPA was responsible for only one beer tent. The FOPA earned $8,010.19 from the 2010 Hoedown, representing an 8% commission on gross sales from the beer tent it staffed; gross beer sales at the entire event were $875,351.70. The other civic groups likewise received an 8% commission on gross sales from the beer tent the civic group staffed.

The concession agreement required the FOPA to obtain and certify to Olympia that it had obtained "(i) comprehensive general liability insurance ...; (ii) required worker's compensation coverage; and (iii) host liquor liability insurance of not less than $500,000 for each occurrence." Also, these insurance policies were to include Olympia, CBS Radio, Live Nation, the Hoedown, and the city of Detroit as additional named insured parties. The FOPA did not obtain liquor-liability insurance.

The concession agreement also contained an indemnification clause providing that "[i]respective of the amount of insurance provided, [the FOPA] shall be liable for and shall indemnify, defend and hold harmless [Olympia] ... against and with respect to any claim, liability, obligation, loss, damage, assessment, judgment, cost and expense ... arising out of or as result of or related to" the FOPA's performance of the agreement.

The issues presented in this appeal concern the application of two exclusions in the CGL policy that Auto–Owners issued to the FOPA. The "Tailored Protection Policy" identifies the insured on its face page as "FOP LODGE # 102" and as a "Club" that is "Not For Profit." The policy both excluded and provided coverage for liquor liability by providing the following in § I(A)(2)(c) under "Exclusions":

This Insurance does not apply to:

* * *

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 beverages.

This exclusion applies only if you are in the business of manufacturing, distributing, selling, serving or furnishing alcoholic beverages. [Emphasis added.]

The policy also both excluded and provided coverage for contractual liability by providing in § I(A)(2)(b) under "Exclusions" that the insurance also did not apply to the following:

b. Contractual Liability

"Bodily injury" or "property damage" for which the insured is obligated to pay damages by reason of the assumption of liability in a contract or agreement. This exclusion does not apply to liability for damages:

(1) Assumed in a contract or agreement that is an "insured contract", provided the "bodily injury" or "property damage" occurs subsequent to the execution of the contract or agreement. However, if the insurance under this policy does not apply to the liability of the insured, it also does not apply to such liability assumed by the insured under an "insured contract".

The meaning of "insured contract" pertinent to this case is found in § V(10) of the policy setting forth various definitions. The parties agree that it means:

That part of any other contract or agreement pertaining to your business ... under which you assume the tort liability of another party to pay for "bodily injury" or "property damage" to a third person or organization. Tort liability means a liability that would be imposed by law in the absence of any contract or agreement. [Emphasis added.]

At an April 1, 2013 hearing on the parties' motions for summary disposition, the trial court ruled with respect to § I(A)(2)(c) of the policy that the FOPA was not "in the business of ... selling, serving or furnishing alcoholic beverages." Therefore, the liquor-liability exclusion of the CGL policy did not apply. The trial court first noted that "business" was undefined and opined that if it's defined as purposeful activity, then the exclusion might apply.

But if we look at other definitions in the business, where we talk about on -- ongoing commercial activity to provide a livelihood to a person, in this case an organization, then it wouldn't apply.

The court also found pertinent a distinction found in some cases of "a single activity or a single incident versus a continuous activity," which favored the FOPA. The court then ruled that the FOPA was not in the business of selling, serving or furnishing alcoholic beverages.

The trial court rejected Auto–Owners' contention that if the FOPA is not in the business of selling alcohol, and the contract between the FOPA and Olympia concerned selling alcohol, then the concession agreement could not be an insured contract because it did not pertain to the FOPA's business. The trial court ruled that the policy definition of "insured contract"—i.e., "pertaining to your business"—was broader than the language "in the business" as used in the liquor-liability exclusion. On this basis, the trial court ruled that the concession agreement pertained to the FOPA's fundraising for its business of civic and charitable activities. Therefore, the contractual-liability exclusion of Auto–Owners' CGL policy did not apply.

For these reasons, the trial court entered an order on April 17, 2013, denying Auto–Owners' motion for summary disposition and granting summary disposition to the FOPA. This order required Auto–Owners to defend and indemnify the FOPA in the underlying dramshop action. On the basis of its ruling on the contractual-liability exclusion, the trial court also ordered that Auto–Owners defend and indemnify Olympia because the concession agreement between the FOPA and Olympia regarding the staffing of beer tents at the three-day Hoedown was an " insured contract."

B. DOCKET NOS. 315901 AND 316511

Plaintiff Chad Seils (Seils) is the ex-husband of...