On appeal from the Superior Court of New Jersey, Law Division, Cumberland County.
King, Long and Stern. The opinion of the court was delivered by King, P.J.A.D. Stern, J.A.D., dissenting.
This case involves the application of the automobile exclusion contained in the standard homeowner's insurance policy to a situation where the insured is sued for giving alcoholic beverages to a minor. After drinking the alcoholic beverages, the minor claims he suffered severe personal injury while cavorting on the insured's otherwise uninsured all-terrain vehicle (ATV). The issue is whether the insured, under his homeowner's policy, is owed a defense on Count Five of the minor's tort complaint which alleges a cause of action against the insured solely for giving a minor alcoholic beverages which contributed to the accident while he was driving the insured's ATV.
This is the factual background. On December 20, 1986 the personal injury claimant, Carl Oliver, age 17, was injured when the ATV he was driving "up-ended." On that day, Dallas Newman, the named insured under the homeowner's policy issued by plaintiff Salem Group; Thomas Cimino, also a minor, and Carl Oliver's cousin; and Oliver went to an isolated property owned by defendant Whibco, Inc. to drive their ATVs on trails winding around gravel pits. Newman is Oliver's uncle. On the way to the gravel pit property, Newman, the only one of legal age, stopped to buy beer for the outing. Newman paid for the beer. At the gravel pits, Newman allowed Oliver to drive his ATV. Newman and Cimino both then drove about on borrowed ATVs while Oliver used Newman's ATV.
After they drove around for a while, Newman brought out the beer. Oliver claims he had four or five cans of beer. Later Oliver took one slug of liquor that Newman offered him. Oliver then resumed driving Newman's ATV. Because of the effect of the alcoholic drinks, Oliver said he drove "harder, faster and recklessly." He fell off Newman's ATV several
times after having these drinks but was unhurt. Oliver describes what then happened:
Afterward, Dallas [Newman] again let me ride his all-terrain vehicle. We were riding in a gravel pit. I was really feeling "good" now from everything I had to drink and was racing with Tom [Cimino]. We hadn't checked out this particular area before. Tom and I started to race up the hill in this gravel pit. When we got to the top, I saw that I couldn't go down the other side because it was too steep. I was going too fast to turn back. I shot over the top and pushed away from the all-terrain vehicle.
The next think I knew, I came to in the hospital.
In April 1989 Oliver filed his personal injury complaint against Newman and the other defendants. In Count Five of the complaint Oliver alleged that (1) Newman, an adult, "supplied alcoholic beverages to him when underage," (2) he became intoxicated and (3) "as the proximate result of [his] consumption of alcoholic beverages supplied to him by defendant Dallas Newman, plaintiff Carl Oliver operated an all-terrain vehicle in such a manner as to cause an accident, injuring himself" because of Newman's "careless and negligent" act "in supplying alcoholic beverages." The duty of Salem Group to defend this claim under Count Five, alleging the careless purveying of alcohol to a minor, is the question before us.
Count Seven of the complaint contains allegations of negligence against Newman specifically arising out of the operation and use of his and the other ATVs on this occasion. Count Seven specifically includes allegations against Newman of negligent loaning, instructing, supervising, equipping, and racing with respect to the ATV owned by Newman and operated by Oliver. There is no coverage dispute on this count. All agree that the claims under Count Seven fall within the automobile exclusion in Salem Group's homeowner's policy. Also, we note that Newman had no available automobile policy or ATV policy (N.J.S.A. 39:3C-20a) at this time.
In June 1989 Salem Group filed this present complaint for declaratory relief on the duty to defend and coverage issues. Both Salem Group and Oliver then moved for summary judgment on an agreed record. Judge Kleiner denied Salem
Group's motion but granted Oliver's motion, ruling that the carrier had a duty to defend the allegations in Count Five, i.e., carelessly providing alcohol to a minor. In the final order the judge carefully provided that he made "no determination as to whether or not there is any duty to pay any adverse judgment that may be entered against Dallas Newman as such a decision will be determined by the facts of the case brought by Carl Oliver and this Court cannot reach a decision on that issue where the facts have not yet been determined." We assume that he recognized that a jury could find no liability against Newman on the "social host" theory, see Kelly v. Gwinnell, 96 N.J. 538, 476 A.2d 1219 (1984), or impose liability under the Count Seven claims alone, for which no coverage was afforded.
In the Law Division, Salem Group contended that the claim by Oliver against Newman was specifically excluded under its homeowner's policy's comprehensive general liability (CGL) feature by the standard owned-automobile exclusion which says:
II. WHAT LIABILITY INTERESTS ARE NOT COVERED
Exclusions -- we are not liable for any loss:
A. Under Coverage (E) or Coverage (F), for bodily injury or property damage;
1. arising out of loading or unloading maintenance, operation, ownership, or use of:
b. motor vehicles owned or operated by, or rented or loaned to, an insured;
In order to trigger coverage there must be an "occurrence" as defined in the policy:
1. Occurrence means an accident, including continuous or repeated exposure to substantially similar conditions.
The policy defines "motor vehicle" as including "a recreational motor vehicle while off the insured premises." The policy defines "recreational motor vehicle" as "a motorized golf cart, snowmobile, or any other motorized land vehicle owned by an insured designed for recreational use off public roads." Thus there is no doubt that Newman's ATV was a motor vehicle as defined by the Salem Group's policy.
As noted, Judge Kleiner found that there was a duty to defend Newman under one of the dual allegations of the complaint. He explained:
The reason for coverage to Newman. Clearly Mrs. Pirolli or Mr. Robinson [Oliver's counsel], in his complaint, asserts in Count 5 a social host liability theory, and I agree with Mr. Point [counsel for Dallas Newman] that the act of negligence in providing alcoholic beverages to a minor occurred irrespective of the foreseeable risk that would flow. Newman's homeowner's policy would have covered for that risk, for any other incident involving Oliver, had Oliver (e.g.) tripped and fell in the sand wash. Had Oliver been negligently injured as a result of any other act, Salem Group would cover for the social host liability which could be imposed upon Newman.
The judge concluded that since the Salem Group policy would cover the named insured homeowner "when he's sued under [the] theory of social host liability," coverage was available despite the fortuitous manner of the happening of the accident, i.e., while the plaintiff was cavorting on an ATV owned by the named insured.
The judge apparently viewed the complaint as alleging dual, concurrent or alternative causation theories. He thought that coverage would ultimately turn on the jury's resolution of the basis for Newman's liability, if any: providing alcohol to a minor, responsibility for use of the owned ATV vehicle, or perhaps both. He said:
However, the difficulty is that the complaint, its phraseology, the social host liability issue in Count 5 is what triggers the responsibility to defend, because the law provides that the strength of the case, or the frivolity of the complaint, or whatever, doesn't exonerate the insurance carrier from providing the defense, but may exonerate the insurance company from providing or having the responsibility to pay.
I would anticipate that at a trial, there would have to be special interrogatories for the jury to determine liability, and they'd have to determine if liability flows from the use of the alcohol or from some other reason that might be developed through discovery process, and therefore, if they rule on social host liability, there may be a responsibility to pay. But [they could] answer it in the negative, the alcohol, the mere -- the mere fact that alcohol was consumed was not the proximate cause of the accident, but something else was the proximate cause of the accident.
The question presented in this case is novel in our jurisdiction but we are inclined to agree with ...