December 2015 Case Notes & Comments

"Courage is being scared to death, but saddling up anyway."
~ John Wayne (1907 - 1979)

MONTHLY QUIZ:  For many years,the Grinch, Jack Frost and Scrooge have worked together on various projects and insured their business through a commercial general liability policy procured at Father Time Insurance. Last year, Jack Frost, Grinch and Scrooge decided to manufacture an eggnog flavored energy drink similar to "Four-Loko", containing 12% alcohol by volume, along with caffeine, taurine and guarana. As it turns out, the eggnog flavored energy drink made the reindeer sick and caused Rudolph, Blitzen, and Prancer to exhibit erratic, unusual and dangerous behavior - ultimately causing Santa to crash into several buildings along his route. The reindeer and/or their estates filed lawsuits, which allege that the energy drinks' combination of ingredients masked the intoxicating effects of the alcohol and caused the reindeers' reckless and dangerous behavior. The suits are tendered to Father Time. Father Time, however, declines the tender, claiming that he is not required to defend the Grinch, Jack Frost or Scrooge pursuant to a "liquor liability" exclusion that applies to alcoholic beverage manufacturers and excludes "'bodily injury' or 'property damage'" caused or contributed to by "the intoxication of any reindeer." In response, Grinch, Jack Frost and Scrooge assert that the underlying lawsuits are not based upon liquor liability, but rather, are based on "stimulant liability." Who is right? Does Father Time have a duty to defend Grinch, Jack Frost and Scrooge in connection with the reindeer lawsuits? You be the judge. (Answer below).

SUBROGATION / RES JUDICATA: Insured-Driver sustained property damage and personal injuries in an automobile accident. Driver's Insurer paid Insured for the damages to his car (minus a deductible) and subsequently filed a lawsuit against Defendants for the property damage. Insurer, however, filed its property damage lawsuit in Insured's name, not in its own name, as subrogee of Insured. Further, Insurer's complaint did not reference subrogation. Later, Insured later filed his own, separate lawsuit against Defendants for his personal injuries. After Insurer settled its property damage lawsuit, Defendants moved to dismiss Insured's personal injury lawsuit on grounds that the action was barred by res judicata, in light of the settlement of the property damage lawsuit, which was brought in Insured's name against the same Defendants. The trial court granted Defendants' motions, dismissing Insured's personal injury action. The appellate court reversed, holding that an Illinois statute related to subrogation actions (i.e. 735 ILCS 5/2-403(d)) provided a statutory exception to res judicata. Further, in response to Defendants' arguments, the appellate court noted that because Insured retained a de minimus interest in the Insurer's property damages lawsuit (i.e. his deductible), Insurer was permitted to bring its property damage suit solely in the name of the Insured. Gadson v. Among Friends Adult Day Care, Inc., 2015 IL App (1st) 141967 (August 13, 2015).

WORKERS' COMPENSATION / EXCLUSIVE REMEDY
: Employee was injured in the course of his employment and subsequently filed and settled his workers' compensation claim against Employer, an LLC that provided security services at electrical utility Company's nuclear power plant. Company, a separately incorporated business entity and owner of the premises, was the sole member of the LLC (i.e. Employer) and reimbursed Employer for all workers' compensation benefits paid to Employer's employees, including Employee. The trial court dismissed Employee's negligence action against Company on the grounds that Company was a closely related entity and joint venture with Employer that paid Employee's compensation benefits. Therefore, the trial court reasoned, that Company was cloaked with the same immunity as Employer under the exclusive remedy provision of the Illinois Workers' Compensation Act (i.e. "Act", 820 ILCS 305/1 et seq.). The appellate court reversed, finding that Company was not Employer's agent, that Employer had no right to control Company and that the benefits paid on behalf of Employer were the result of a voluntary undertaking, not pursuant to any legal or contractual obligation. As such, Company was not entitled to the protections of the exclusive remedy provision. Burge v. Exelon Generation Company, LLC, 2015 IL App (2d) 141090 (July 30, 2015).

PERSONAL INJURY / OPEN AND OBVIOUS:
Plaintiff-Guest, an adult visitor of Defendant's resort, broke his neck when he dove into a natural lake from Resort's pier.  Guest brought a negligence action against Resort and Resort moved for summary judgment on the basis that it owed no duty to Guest because the danger of diving into water was open and obvious.  The trial court granted Resort's motion and the appellate court affirmed, holding that, as a matter of law, the danger of paralysis resulting from a flat dive off a pier into muddy waters of uncertain depth in a natural lake is open and obvious to a reasonable adult, thus no duty was owed by Resort. EDITOR'S NOTE: The significance of the court's opinion lies in its examination of the two distinct routes Illinois courts have used to determine whether a possessor of land owes a duty to warn invitees of conditions on the land. The opinion also includes detailed discussions of the open and obvious doctrine, as well as the 'distraction' and 'deliberate encounter' exceptions. Bujnowski v. Birchland, Inc., 2015 IL App (2d) 140578 (July 21, 2015).  

ANSWER TO QUIZ: Father Time is right. He has no duty to defend the Grinch, Jack Frost or Scrooge in the underlying lawsuits. The Grinch, Jack Frost and Scrooge admitted that they manufactured alcoholic beverages. Since the reindeer lawsuits allege liability caused or contributed to by the intoxication of the reindeer, which resulted in bodily injuries, the claims fall squarely within the liquor liability exclusion and Father Time has no duty to defend. Phusion Projects, Inc. v. Selective Insurance Company of South Carolina, 2015 IL App (1st) 150172 (Dec. 18, 2015).

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