On appeal from Superior Court of New Jersey, Law Division, Atlantic County.
Before Judges Long, Stern and Kleiner.
The opinion of the court was delivered by: Long, P.j.a.d.
On November 11, 1994, plaintiffs Catherine Stafford, Wendell Jones and Prince Bain *fn1 were patrons at a nightclub known as Club Mirage located in Atlantic City, New Jersey. At approximately 2:00 a.m. gunfire erupted in Club Mirage and all three patrons were shot. The shots were fired by other patrons and not by Club Mirage employees. Defendants, Pat's Pizza & Pub, Inc., Sabo Pullella and Anthony D. Pullella are the owners of the nightclub.
At the time of this incident, Club Mirage was covered by a commercial general liability policy (the "Policy") issued by T.H.E. Insurance Company. The first page of the Policy states:
Various provisions in this policy restrict coverage. Read the entire policy carefully to determine rights, duties and what is and is not covered.
The Policy also provides coverage for bodily injury and property damage. Bodily injury is defined as "bodily injury, sickness or disease sustained by a person, including death...." In an endorsement, injury resulting from assault and battery is specifically excluded. The exclusion states in full:
In consideration of the premium charged, it is agreed that NO coverage of any kind (including but not limited to cost of defense) is provided by this policy for Bodily Injury and/or Property Damage arising out of or caused in whole or in part by an assault and/or battery. Further, NO coverage is provided if the underlying operative facts constitute an assault and/or battery irrespective of whether the claim alleges negligent hiring, supervision and/or retention against the insured or any other negligent action.
This endorsement supplements any other provision(s) of the policy to the extent it is not inconsistent therewith. In the event this endorsement is deemed inconsistent with any other provision of the policy, then this endorsement overrides and replaces that provision.
On November 28, 1994, Club Mirage was advised of Stafford's claim. On December 21, 1994, All Risk Claims Services, Inc., on behalf of T.H.E. Insurance Company, acknowledged notice of Stafford's claim to its insured, Club Mirage and subsequently forwarded a reservation of rights letter to Club Mirage. A claims adjuster advised Stafford that she was handling the case. Stafford thus forwarded medical bills and other documentation.
All three patrons subsequently filed complaints asserting various causes of action including inadequate security; negligent hiring, training and supervision of employees; implied warranty and public nuisance.
T.H.E. Insurance Company disclaimed coverage and on March 18, 1996, Stafford (later joined by Jones) filed the instant declaratory judgment action, seeking a determination that the assault and battery exclusion in the insurance policy did not apply and that T.H.E. Insurance Company was required to defend and indemnify the insured. T.H.E. Insurance Company answered, denying the allegations and asserting various defenses. The three underlying cases were stayed pending Conclusion of the declaratory judgment action.
In October 1996, Stafford, Jones and Bain filed motions for partial summary judgment against T.H.E. Insurance Company seeking to compel it to defend and indemnify Club Mirage. T.H.E. Insurance Company, in turn, filed a motion for summary judgment on the coverage issues seeking a determination that its exclusion ...