In Harleysville Ins. Co. v. Rode’s Fireside Restaurant & Tavern, the New Jersey Superior Court, Appellate Division, in an unpublished decision1, held that a general liability insurer had a duty to defend its insured, a tavern, in connection with allegations that it was negligent in allowing an intoxicated employee to leave the tavern and operate her motor vehicle. In Rode, the decedent worked as a bartender for the defendant. Arriving to work, she became intoxicated. Leaving her shift early, she was involved in a fatal car accident. In the complaint, the estate brought suit against the tavern alleging negligence, Dram Shop violations, and wrongful death and survivorship. According to the complaint, the tavern knew that the decedent was disoriented and visibility impaired; however, they permitted her to leave her shift early and to depart the premises in her impaired state when they knew or should have reasonably known that she would drive her vehicle. The complaint did not allege that the decedent’s injuries arose out of the and in the course of her employment.

Rode tendered their defense to their general liability carrier, Harleysville, and their workers compensation carrier, New Jersey Manufacturers. Harleysville defended under a reservation of rights, but New Jersey Manufacturers denied coverage. Harleysville then filed a declaratory judgment action against New Jersey Manufacturers and Rode. Following cross-motions for summary judgment, the trial court held that the New Jersey Manufacturers did not have an obligation to provide coverage and Harleysville did. In so holding, the court reasoned that the injuries did not arise out of the decedent’s employment and that the negligence asserted by the estate did not allege any facts that particularly implicated the decedent’s employment. The court also stated that the complaint did not allege any duty on the part of the insured that arose from its contract of employment with the decedent. There were no allegations that the insured owed the decedent any duty other than that owed to any business invitee. Moreover, there were not words implicating that the decedent’s impairment was directly connected or indirectly connected to her employment. Interestingly, the court also noted that the decedent had been a patron on several other occasions.

On appeal, Harleysville maintained the position that the employee exclusion which removes coverage for “bodily injury to an employee of the insured arising out of and in the course of the employment by the insured” was applicable. Harleysville argued that the term “arising out of” is afforded an expansive interpretation, and therefore, the exclusion should apply. The Appellate Division affirmed the trial court adopting its reasoning and further noted that the complaint did not allege that the decedent’s intoxication arose out of and in the course of her employment.

1“No unpublished opinion shall constitute precedent or be binding upon any court. Except for appellate opinions not approved or publication that have been reported in an authorized administrative law reporter, and except to the extent required by res judicata, collateral estoppel, the single controversy doctrine or any other similar principle of law, no unpublished opinion shall be cited by any court. No unpublished opinion shall be cited to any court by counsel unless the court and all other parties are served with a copy of the opinion and of all contrary unpublished opinions known to counsel. New Jersey Rules of Court, R. 1:36-3.

What It Means to You

The duty to defend is determined by comparing the allegations in the complaint with the terms of the policy. While it is the burden of the insured to bring their claim within the scope of coverage afforded under the policy, it is the burden of the insurer to prove the applicability of an exclusion. Where the allegations in the complaint, if proven true, do not trigger the exclusion, the carrier is obligated to defend.