The issues in these consolidated appeals involve the interpretation of an insurance policy. The first issue is whether the policy provides coverage for a shooting incident that occurred in a bar and, if so, in what amount? Second, may the policy’s coverage limit be reduced by the amount of attorney fees and other defense costs? Finally, when does the insurer’s duty to defend terminate?
The insured is the owner of a bar in Huntington, West Virginia. On February 21, 2010, an unknown man entered the bar and began firing a gun, striking and injuring three patrons. Each of the three patrons sued the bar owner alleging negligence in failing to provide adequate security. The insurer, Max Specialty, filed a complaint seeking a declaratory judgment regarding coverage.
The policy in question has a $1,000,000 policy limit. There is also a “limited assault or battery coverage endorsement” which purports to provide, at most, $25,000 in coverage for events arising out of an assault or battery. The policy itself has language preventing the insurer from reducing the limits of coverage by the amount of defense costs. However, the endorsement has language specifically stating that defense costs “will reduce the limits of coverage.”
The trial court granted summary judgment in favor of Max Specialty, finding that the endorsement was controlling. Thus, the $25,000 limit applied and this amount may be reduced by any costs of defending the litigation. Moreover, the court concluded that after the $25,000 limit was exhausted, whether by settlements, judgments, or defense costs, Max Specialty no longer owed any duty to defend.
The patrons making claims
The patrons argue that from the standpoint of the insured, i.e., the bar, the shooting was accidental and, therefore, an “occurrence” for purposes of the policy. The claim against the bar sounds in negligence. Because the exclusion applies only to intentional acts, it does not exclude coverage for the claim against the bar. At best, the language of the exclusion is ambiguous, meaning that it must be construed in favor of the insured. Accordingly, the full $1,000,000 coverage limit is available.
The bar addresses the two remaining issues. According to the bar, the assault or battery endorsement must be read in conjunction with the policy. In fact, the endorsement expressly refers to and incorporates provisions of the policy. Therefore, the court must apply the language in the policy, which is more favorable to the insured than the language in the endorsement. Specifically, the policy provides that the coverage limits will not be reduced by defense costs and that the insurer’s duty to defend continues until the coverage limits have been “used up…in the payment of judgments or settlements.”
Max Specialty argues that the policy itself excludes all coverage for claims arising out of assault or battery. Thus, the only coverage is provided under the limited endorsement. The language of the endorsement, it says, is clear and unambiguous. Therefore, the $25,000 coverage limit applies. Furthermore, the coverage limit may be reduced by any defense costs incurred, including attorney fees.
With regard to the duty-to-defend issue, Max Specialty argues that the endorsement is a stand-alone agreement that is separate from the rest of the policy. Accordingly, when the coverage limit has been exhausted through either the payment of claims or the payment of defense costs, the insurer will have fulfilled all of the duties owed under the endorsement. At that point, the duty to defend will have terminated.
Because this case is on the Rule 20 docket, we can expect a new syllabus point dealing with these coverage and duty-to-defend issues.