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United States Liability Insurance Co. v. Trance Nite Club

September 24, 2007

UNITED STATES LIABILITY INSURANCE COMPANY, PLAINTIFF,
v.
TRANCE NITE CLUB, INC., D/B/A "IMAGE" D/B/A "BEE JAYS BAR AND GRILL," JENNIFER MCPHILLIPS, PATRICIA GUZMAN, INDIVIDUALLY AND AS ADMINISTRATRIX OF THE ESTATE OF NICHOLAS GUZMAN, DECEASED, CHESTER RODMAN, INDIVIDUALLY AND AS ADMINISTRATOR OF THE ESTATE OF NICHOLAS RODMAN, DECEASED, DEFENDANTS.



The opinion of the court was delivered by: Hurley, Senior District Judge

MEMORANDUM OF DECISION AND ORDER on Motion for Summary Judgment (doc. #18)

This case arises from the renewal of a liquor liability policy which is a policy designed to cover an establishment from lawsuits relating to the service of alcohol. Plaintiff United States Liability Insurance Company ("Plaintiff" or "U.S. Liability"), an insurance company, seeks a declaratory judgment that it need not defend the insured, Defendant Trance Nite Club, Inc. d/b/a "Image d/b/a "Bee Jays Bar and Grill" ("Trance"), in a state-court wrongful death suit and that it may rescind the policy it issued to Trance on the basis of Trance's material misrepresentation made in its policy renewal application. Therefore, U.S. Liability moves for summary judgment. For the reasons stated below, U.S. Liability's Motion for Summary Judgment is GRANTED.

I. BACKGROUND

A. Material Facts

The following facts are gleaned from the Parties' respective Local Rule 56.1 Statements*fn1 and are undisputed unless otherwise noted.

This dispute over insurance coverage and recision of an insurance policy arises in conjunction with a state-court wrongful death action. Defendant Chester Rodman initiated the suit after the death of his 19-year-old son, Nicholas Rodman. Nicholas died as a result of injuries he sustained on April 4, 2004, as a rear-seat passenger in an automobile operated by Nicholas Guzman. Guzman was also 19 years old and, at the time of the accident, had a blood alcohol level of .17, more than twice the legal limit. Guzman died immediately after the accident. In addition to suing Guzman's estate and Guzman's mother, Patricia, as well as Defendant McPhillips (the driver of the other automobile involved in the April 4th accident), Chester Rodman also sued Trance, a bar establishment, based upon New York State's "Dram Shop Law."

In August 2002, U.S. Liability had issued Trance a liquor liability policy for a twelve-month period, expiring on or about August 20, 2003. Trance sought to renew that policy, submitting a renewal application on July 1, 2003. At that time, U.S. Liability quoted a renewal premium of $3,250. It maintains that the quote was based on a warranty of no violations relating to the illegal sale of alcohol; Trance disputes the assertion regarding a warranty as unsubstantiated. Examination of the renewal application shows there is a blocked section at the bottom of its second page which is entitled "WARRANTIES" and includes the signature block. The section reads, inter alia:

I/we warrant that the information contained herein is true and that it shall be the basis of this policy of insurance and deemed incorporated therein, should the company evidence its acceptance of this application by issuance of a policy. I/we agree that such policy shall be null and void if such information is false, or misleading, or would materially affect acceptance of the risk by the company. (U.S. Liability Renewal Application (signed July 1, 2003), attached as Ex. 8 to Pl.'s Not. of Mot. (doc. #18).*fn2

One of the questions on the renewal application was: "If a bar or tavern, are patrons under the legal drinking age permitted on premises?" (See Ex. 8 at No. 27.) An affirmative answer required an explanation. Trance answered in the affirmative, explaining that on occasion, its admission policy was 18-years of age for entrance, but 21-years of age to drink, and that it used bracelets to distinguish those who could purchase alcohol. (See id.)

Another question, Question No. 28, read: "Within the past 5 years, has applicant and/or employees of the applicant's establishment been fined or cited for violations of law or ordinance related to illegal activities or the sale of alcohol?" (See id. at No. 28 (emphasis in original).) Like the prior question, here, an affirmative answer required an explanation. Trance marked the "No" box. (See id.)

U.S. Liability first learned of Chester Rodman's wrongful death suit when it received a copy of the summons and complaint on January 31, 2005. Thereafter, the insurance company appointed counsel to represent Trance. In connection with the case, Jeffrey Cartman, Trance's president, appeared for a deposition in November 2005. Cartman testified, inter alia:

Q: Between 2000 and 2004, has your bar ever been cited by the State Beverage and Control Board?

Counsel: Over objection.

Witness: What does that mean?

Counsel: You can answer it.

A: Have I ever been cited by the State Liquor Authority?

Q: Yes.

A: Yes. * * *

Q: Were the violations issued to you personally, the citations issued to you personally, Jeffrey Cartman, or was it Trance Nite Club and you were ...


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