Insurance policy covers drinking party assault on insured’s business property

By Joe Forward, Legal Writer, State Bar of Wisconsin

Feb. 7, 2011 – An insured who hosted a party is covered against allegations that he was negligent in serving alcohol to an underage guest who later caused bodily harm to the plaintiff, another guest at the party.

That’s what the District II Wisconsin Court of Appeals decided in Schinner v. Gundrum, 2011AP564 (Feb. 2, 2012), reversing a circuit court order that dismissed West Bend Mutual Insurance Company from a negligence case commenced by Marshall Schinner against Michael Gundrum.

Gundrum was 21 years old when he hosted a party in a shed on his family’s business property. Schinner alleges that Gundrum served alcohol to an underage guest, and this negligence caused Schinner to be intentionally assaulted by the drunken underage party-goer.

The Gundrum family had a homeowner’s insurance policy with West Bend Mutual. West Bend was initially dismissed from the suit by the circuit court, which found that the homeowner’s policy did not cover this type of “occurrence” at that “location.” The appeals court disagreed.

Was it an accident for insurance purposes?

The Gundrums’ policy covered personal liability for damages that result from bodily injury caused by an “occurrence,” including “accidents.” The policy did not define the term “accident.”

The appeals court reviewed dictionary definitions of the term “accident” and examined Wisconsin case law to determine that a third-party assault on the insured’s property was a type of accident demanding coverage under the homeowner’s policy.

“Although it may seem counterintuitive to think of an assault as accidental, we rely on Wisconsin case law that has addressed whether an assault is an accident for purposes of insurance coverage,” wrote Judge Brian Blanchard, noting that the Wisconsin Supreme Court has addressed the issue.

An assault is accidental, the appeals court explained, if the injured person “did not intend, expect, or anticipate the assault or resulting injuries,” viewing the incident from the injured person’s vantage point. It may not be an “accident,” however, if the insured commits the assault.

The appeals court examined Estate of Sustache v. American Family Mutual Insurance Co., 2008 WI 87, 311 Wis. 2d 548, 751 N.W.2d 845, also a case in which an assault occurred at an underage drinking party. But unlike the present case, the insured in Sustache committed the assault.

“In effect, the [Sustache] court views the assault from the standpoint of the insured and, viewed from that standpoint, the court concludes the assault was not accidental,” Judge Blanchard wrote. “Regardless of which way we view it, the result is the same because the assault was an accident from both the standpoint of the injured party (Schinner) and the insured (Gundrum).”

Location not excluded

The appeals court also rejected West Bend’s argument that the homeowner’s insurance policy bared coverage for Schinner’s injuries because they occurred on a non-insured premises.

Specifically, the policy barred coverage for bodily injuries “arising out of” a location that was not the residence or a premises used in connection with the residence.

West Bend argued Schinner’s injuries arose out of Gundrum’s use of the shed, and the shed was not used in connection with the Gundrum residence. Although the shed was located on family business property, the court noted that the Gundrums used the shed to store personal property.

“[W]hile it was the undisputed physical situs of injury, no particular condition of the premises correlates to the basis of liability for the injury,” Judge Blanchard wrote. “And, to show this correlation, the insurer must present evidence that the alleged negligence is ‘related to the condition of’ the premises.”