Founders Insurance Company v. DA Shark et. al.
This coverage matter arose out of a personal injury lawsuit in which multiple plaintiffs sought recovery for injuries they sustained while in a bar fight. The bar was owned by a Founder’s insured. Two of the three plaintiffs claimed they were stabbed multiple times and had to be airlifted from the scene for immediate care. Plaintiff’s counsel demanded $2 million to settle the claim and argued that Founders owed this amount in coverage to its insured. The basis for counsel’s argument was that Founders did not timely disclaim coverage under the General Liability or Liquor Liability policies.
Kathleen Mulholland filed a declaratory judgment action contending that Founders issued a single policy and that the Founder’s insured was being offered the full measure of coverage it purchased. The general liability portion of the policy contained a liquor liability exclusion, however, the declarations page of that policy referenced a New York Liquor Liability Coverage Part. Moreover, the Liquor Liability provision contained an exclusion for assault and battery but there was an Assault and Battery Buyback endorsement with a sublimit of $300,000.
Counsel representing the plaintiffs in the underlying matter, who were added as parties to the declaratory judgment action, claimed that Founders did not timely disclaim under the two policies and that Founders was obligated to the $1 million limit on each policy. Ms. Mulholland sucessfully argued that Founders was not required to issue a disclaimer because Founders was, in fact, providing its insured with the coverage it purchased. In finding in favor of Founders, the Court held that; “this is not a situation where Founders is disclaiming coverage. It is defending its insured in the underlying case and is affording coverage to its insured pursuant to the insuring agreement, which contains a $300,000 sublimit.” Following the Court’s decision, the underlying matter was settled for $300,000.