Yakitori Boy, Inc. v. Starr Indem. & Liab. Co.

YAKITORI BOY, INC., et al. v. STARR INDEMNITY & LIABILITY COMPANY

CIVIL ACTION NO. 18-4094

UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA

June 28, 2019

MEMORANDUM RE: MOTION FOR JUDGMENT ON THE PLEADINGS

Baylson, J.

I. Introduction

In this declaratory judgment action, Plaintiff Yakitori Boy, Inc. seeks a declaration regarding the limits of coverage required by an insurance policy it has with Defendant Starr Indemnity & Liability Company. This matter is related to an ongoing personal injury action in Pennsylvania state court, where Yakitori Boy is named as a defendant and Starr is tasked with defending and indemnifying Yakitori Boy under the insurance policy at issue here. Starr removed the declaratory judgment action to this Court and now moves for Judgment on the Pleadings.

For the reasons that follow, Starr's Motion for Judgment on the Pleadings is DENIED.

II. Factual History

The events that give rise to this declaratory judgment action are the subject of a second amended complaint, (ECF 7-1 at Ex. B., the "Underlying Complaint"), filed by Sierra in the Philadelphia Court of Common Pleas, No. 2900 (the "Underlying Action"). The Underlying Complaint alleges that Sierra was walking with a group of individuals in Philadelphia when, "suddenly and without warning," Gordon and Schmid struck Sierra in the head, causing him to fall to the ground. (Underlying Complaint at ¶¶ 9-10). When Sierra attempted to stand up, the underlying complaint alleges that Gordon and Schmid "again punched and/or kicked [him] about his face and head, causing [him] to lose consciousness." (Id.). Sierra allegedly suffered various physical injuries and incurred medical expenses from of the incident. (Id. ¶¶ 16-17).

The Underlying Complaint asserts two causes of action against Gordon and Schmid for assault and battery and negligence. It also asserts a cause of action against Yakitori Boy for negligently overserving alcohol to Gordon and Schmid prior to the attack. (Id. at ¶ 32).¹ Sierra claims that his injuries "were a proximate and foreseeable result of [Yakitori Boy's] act of supplying . . . alcoholic beverages to visibly intoxicated patrons." (Id. ¶ 31).² Yakitori Boy's alleged negligence consisted of:

(a) Continuously and repeatedly serving alcoholic beverages to its patrons, including the patrons who assaulted and battered the Plaintiff, despite the knowledge that said patrons were intoxicated;

(b) Negligence per se as being in violation of 47 Pa. C.S. 4-493(a) unlawful acts relative to liquor, malt and beverages and licenses;

(c) Failing to have a responsible management alcohol program [sic] "RAMP" to prevent the service of alcohol to visibly intoxicated patrons in violation of 47 Pa. C.S. 4-493; and

(d) Failing to hire proper and qualified bartenders, as well as, have proper and/or sufficient bartender training to prevent the service of alcohol to visibly intoxicated patrons in violation of 47 Pa. C.S. 4-493.

(Id. ¶ 33).

Since Sierra filed the Underlying Complaint, Starr has defended Yakitori Boy under the terms of a liquor liability insurance policy (the "General Policy"). (ECF 25, "Am. Compl. for Decl. Judgment," at ¶ 31). The General Policy requires Starr to provide coverage for "those sums that the insured becomes legally obligated to pay as damages because of 'injury' to which [the] insurance applies if liability for such 'injury' is imposed on the insured by reason of the selling, serving or furnishing of any alcoholic beverage." (Id. ¶ 35). The insurance limits for liquorliability coverage are $1 million in the aggregate and $1 million for each common cause. (Id. ¶ 36).

The General Policy's coverage is modified by an Assault and Battery Exclusion (the "Exclusion") and an Assault and Battery Endorsement (the "Endorsement"). (See ECF 7-3). The Exclusion provides that:

This insurance does not apply to:

Assault and Battery

(1) "Bodily injury", "property damage", "injury" or "personal and advertising injury" arising from the following:

(a) "assault and battery" or any act or omission in connection with the prevention or suppression of such acts; or

(b) harmful or offensive contact between or among two or more persons . . .

(2) This exclusion applies regardless of the degree of capability or intent and without regard to:

(a) whether the acts are alleged to be by or at the instruction or at the direction of the insured, his officers, "employees", agents or servants; or by any other person lawfully or otherwise on, at or near the premises owned or occupied by the insured; or by any other person;

(b) the alleged failure of the insured or his officers, "employees", agents or servants in the hiring, supervision, retention or control of any person, whether or not an officer, "employee", agent or servant of the insured;

(c) the alleged failure of the insured or his officers, "employees", agents or servants to attempt to prevent, bar or halt any such conduct.

(ECF 7-3 at the "Exclusion," at ¶ A.2). The Endorsement provides that:

A. The following is added to . . . the Liquor Liability Coverage Form of Section 1 - Liquor Liability Coverage . . .

We will pay those sums that the insured becomes legally obligated to pay as damages for "bodily injury," "property damage", or "personal and advertising injury" arising from "Assault and/or Battery."

This endorsement applies regardless of the degree of culpability or intent and without regard to:

(1) whether the acts are alleged to be by or at the instruction or at the direction of the insured, his officers, "employees", agents or servants; or by any other person lawfully or otherwise on, at or near the premises owned or occupied by the insured; or by any other person;

(2) the alleged failure of the insured or his officers, "employees", agents or servants in the hiring, supervision, retention or control of any person, whether or not an officer, "employee", agent or servant of the insured.

(ECF 7-3 at the "Endorsement," at ¶ A). The Endorsement limits the amount of insurance available for claims that fall under its terms to $100,000 for each occurrence and $100,000 in the aggregate. (Endorsement at "Schedule"). The Exclusion defines "Assault and Battery" as follows:

a. Actual or threatened assault or battery whether caused by or at the instigation or direction of any insured, his "employees", patrons or any other persons; or

b. The failure of an insured or anyone else for whom [an/any] insured is legally responsible to prevent or suppress assault; or

c. Battery; or

d. The negligent:

(1) employment;

(2) investigation;

(3) supervision;

(4) training;

(5) retention

of a person for whom any insured is or ever was legally responsible and whose conduct is described in a., b., c. and d. above.

e. The alleged failure of the insured or his officers, "employees", agents or servants to attempt to prevent, bar or halt any such conduct.

f. "Assault and Battery" includes, but is not limited to, sexual assault and battery.

(Exclusion ¶ C). The Endorsement provides a substantially similar definition of "Assault and/or Battery," except that it omits language about the alleged failure of an insured or its agents to "attempt to prevent, bar or halt" otherwise defined conduct. (See Endorsement ¶ E).

Although Starr agreed to defend Yakitori Boy in the Underlying Action, Starr alerted Yakitori Boy by letter dated August 14, 2018, that it would only provide coverage under the limits of liability in the Endorsement in the amount of $100,000 for each occurrence and $100,000 in the aggregate. (Am. Compl. for Decl. Judgment ¶ 32). Yakitori Boy then filed an action in the Philadelphia Court of Common Pleas seeking a declaration that Starr is obligated to defend and indemnify it in connection with the Underlying Action up to the $1 million limit provided for in the General Policy.

III. Procedural History

Starr removed the declaratory judgment action to this Court on September 24, 2018. (ECF 1). Starr then filed a Motion for Judgment on the Pleadings on October 19, 2018, (ECF 7, "Mot." or "Motion"), which is the subject of this Memorandum Opinion. Sierra and Yakitori Boy responded in opposition on January 28, 2019, (ECF 19, "Sierra Opp'n"; ECF 20, "Yakitori Boy Opp'n"), and Starr replied in support on February 11, 2019. (ECF 22, "Reply").

Amid rounds of briefing on the Motion, Sierra moved to remand the case to state court on October 24, 2018. (ECF 8). This Court denied Sierra's Motion to Remand on January 14, 2019, finding that Sierra is a nominal party to this action but nonetheless should have been aligned as a plaintiff with Yakitori Boy. (ECF 18). The Court then granted Yakitori Boy leave to file a First Amended Complaint for Declaratory Judgment, which added Gordon and Schmid as plaintiffs. (ECF 23; ECF 25, "Am. Compl. for Decl. Judgment"). The Amended Complaint, filed on March 26, 2019, remains the operative complaint before this Court. Starr filed an Answer on April 15, 2019. (ECF 30).

By letters to the Court, the parties agreed that the Motion for Judgment on the Pleadings was not mooted by the filing of the Amended Complaint for Declaratory Judgment, and that theMotion encompasses the allegations in that pleading. The Court then gave Gordon and Schmid until May 23, 2019, to file any response to the Motion. (ECF 31). No further briefing was submitted, and the Motion is now ripe for review.³

IV. Jurisdiction and Legal Standard

A. Jurisdiction

Yakitori Boy instituted this action seeking a declaratory judgment under Pennsylvania's Declaratory Judgments Act, 42 Pa. C.S. § 7531 et seq. This Court has subject matter jurisdiction under 28 U.S.C. § 1332(a)(1) because the parties are diverse and the amount in dispute exceeds $75,000. In an action for declaratory judgment where the sole basis for federal jurisdiction is diversity, a court must apply the substantive law of the state in which it sits. See Liberty Mut. Ins. Co. v. Sweeney, 216 F.2d 209, 210 (3d Cir. 1954). This Court will therefore apply Pennsylvania law as it applies to insurance...