270_C045

Liquor Liability Exclusion Applicable To VFW

Businessowners	Business of Selling Alcohol
Causes of Loss/Perils	Liquor License Required

Liability coverage in a Businessowners policy carried by a Veterans of Foreign Wars Post (VFW) contained the familiar "alcoholic beverages" exclusion. At the end of the exclusion, a statement appeared that it applied "....only if you are in the business of manufacturing, distributing, selling, serving or furnishing alcoholic beverages."

The evidence made clear that a 20-year-old man (underage in Wisconsin for purchasing liquor) was "under the influence" after drinking at the post's bar. Shortly thereafter, one man was killed and another severely injured when he crossed the centerline of a road and struck two oncoming motorcycles.

Legal action against the insured VFW resulted in a trial court finding "no coverage" and granting summary judgment in favor of the insurance company. The decision was reversed on appeal, and the Wisconsin Supreme Court then reviewed the matter.

The main question was whether the post was in the business of selling or serving alcoholic beverages. The court determined that it was, despite the argument that it was a nonprofit fraternal society. The precedent established that activities determined if an entity was a "business" rather than the purpose for which it was incorporated being the basis for such determination.

The record demonstrated that the bar was open to the public at least three days a week and that six bartenders and two other people were employed at the time of the accident to serve alcoholic beverages at a price. The post held an alcoholic beverage license and was a Tavern League of Wisconsin member. It paid state sales tax and was subject to federal income tax for income derived from the bar.

The high court concluded that the insured was in the business of selling and serving alcoholic beverages and that the insurer was not required to provide defense and indemnification.

The appeal court's decision was affirmed in favor of the insurance company and against the insured.

Spranger, Plaintiff-Respondent-Petitioner v. Greatway Ins. Co. ET AL., Defendants-Petitioners-Respondents. WI Supreme Court. No. 92-1617. April 18, 1994. CCH 1994 Fire and Casualty Cases, Paragraph 4763.