COLONY INSURANCE COMPANY v. ASPEN SPECIALTY INSURANCE COMPANY

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF NEW JERSEY

COLONY INSURANCE COMPANY Civil Action No. 20-cv-09446-JHR-JS

Plaintiff,

v.

Opinion

ASPEN SPECIALTY INSURANCE

COMPANY; AMERICAN

GUARANTEE AND LIABILITY

INSURANCE COMPANY;

HOSPITALITY SUPPORTIVE

SYSTEMS, LLC; DIVE BAR DIVA,

LLC t/a THE ALIBI ROOM

Defendants.

Defendant Aspen Specialty Insurance Company (“Aspen”) issued an insurance policy to

Defendant Hospitality Supportive Services, LLC (“HSS”) stating that $1 million is “the most that

[Aspen] will pay” to insure liquor liability claims (the “Aspen Policy”). In the motions for

judgment on the pleadings presently before the Court, excess insurers Colony Insurance

Company (“Colony”) and American Guarantee and Liability Insurance Company (“AGLIC”) ask

the Court to declare that Aspen must insure more than $1 million in liquor liability claims. [Dkt.

43; Dkt. 46]. For the reasons set forth below, the Court declines to do so and will deny both

motions.

I. Background

Colony, Aspen, and AGLIC issued insurance policies to HSS, an insurance purchasing

group that administers a shared-risk insurance program for hospitality and restaurant industry

businesses (the “Shared Risk Program”). [Dkt. 1, Compl. ¶ 21]. Approximately 205 businesses

subscribe to and receive insurance coverage through the Shared Risk Program (“Subscribers”).

[Dkt. 6 at 7]. For the period from June 13, 2015 to December 13, 2016, Aspen provided the

primary insurance policy for the Shared Risk Program, Colony provided an excess insurance

policy (the “Colony Policy”), and AGLIC provided a third policy excess to both the Aspen

Policy and the Colony Policy (the “AGLIC Policy”). [Compl. ¶ 31; Dkt. 43-2 at 15 n.1]. Each

policy requires the respective insurer to defend and indemnify Shared Risk Program participants

in litigation concerning certain covered events. [Compl. ¶¶ 24, 27, 32]. The Colony Policy

states that Colony’s coverage obligations kick in after “proper exhaustion of the limits of the

underlying Aspen Policy.” [Compl. ¶ 31]. Likewise, AGLIC’s obligations begin when the

Colony Policy’s limits are exhausted. [See Dkt. 46-2 at 15]. The parties disagree on the Aspen

Policy’s coverage limits.

a. The Aspen Policy

Three components of the Aspen Policy are relevant to the present dispute. First is the

“Commercial General Liability Declarations” and the “Commercial General Liability Coverage

Form,” which the Court will refer to collectively as the “Base Policy.” The Base Policy

establishes a $1 million coverage limit for “each occurrence” and a $2 million “general

aggregate” coverage limit for covered events. [Dkt. 43-2 at 4]. The Base Policy’s “Commercial

General Liability Coverage Form” defines events and injuries to which the Base Policy’s

coverage limits apply. Section I- Coverage A of the “Commercial General Liability Coverage

Form” contains an exclusion which states

2. Exclusions

This insurance does not apply to:

***

c. Liquor Liability

“Bodily injury” or “property damage” for which any insured may be held liable

by reason of:

(1) Causing or contributing to the intoxication of any person;

(2) The furnishing of alcoholic beverages to a person under the legal

drinking age or under the influence of alcohol; or

(3) Any statute, ordinance or regulation relating to the sale, gift, distribution

or use of alcoholic beverages.

This exclusion applies even if the claims against any insured allege

negligence or other wrongdoing in:

(a) The supervision, hiring, employment, training or monitoring of

others by that insured; or

(b) Providing or failing to provide transportation with respect to any

person that may be under the influence of alcohol; if the “occurrence”

which caused the “bodily injury” or “property damage”,

involved that which is described in Paragraph (1), (2) or (3) above.

(“Liquor Exclusion”). [Dkt. 43-2 at 11].

The other two relevant components are endorsements that amend the Base Policy. The

Liquor Liability Extension Endorsement (“Liquor Endorsement”) amends the Base Policy’s

Liquor Exclusion specifically. It states that the Liquor Exclusion “shall not apply to the extent of

the coverage provided by this Endorsement.” [Dkt. 43-2 at 84]. It further states the following:

Additional Paragraph 1.

The Liquor General Aggregate Limit set forth in the Schedule of

this Endorsement is the most we will pay under this policy for all

damages because of all “bodily injury” and “property damage”

included within the “liquor hazard” that is sustained by one or

more persons or organizations.

Additional Paragraph 2.

Subject to Additional Paragraph 1. above, the Liquor Each

Location Aggregate Limit set forth in the Schedule of this

Endorsement is the most we will pay under this policy for all

damages because of “bodily injury” and “property damage”

included within the “liquor hazard” that is sustained by one or

more persons or organizations as the result of the selling, serving

or furnishing of any alcoholic beverage(s) at a location to which

this insurance applies.

Additional Paragraph 3.

Subject to Additional Paragraph 1. & 2. above, the Liquor Each

Location Occurrence Limit set forth in the Schedule of this

Endorsement is the most we will pay under this policy for damages

because of “bodily injury” and “property damage” included within

the “liquor hazard” at each location to which this insurance

applies, that is sustained by one or more persons or organizations

as the result of the selling, serving or furnishing of any alcoholic

beverage(s) to any one person.

“Liquor hazard” means all “bodily injury” and “property damage”

arising out of the selling, servicing or furnishing of any alcoholic

beverage(s).

[Dkt. 43-2 at 84–85]. The Liquor Endorsement also contains the following schedule:

SCHEDULE

LIQUOR EACH LOCATION OCCURRENCE LIMIT: $1,000,000

LIQUOR EACH LOCATION AGGREGATE LIMIT: $1,000,000

LIQUOR GENERAL AGGREGATE LIMIT: $1,000,000 [sic]

ALL OTHER TERMS, CONDITIONS, AND EXCLUSIONS REMAIN UNCHANGED.

[Id.].

Finally, the “Designated Location(s) General Aggregate Limit” endorsement (“All

Subscribers Aggregate”) sets aggregate coverage limits for each Subscriber and for all

Subscribers collectively. It states

A. Limits of Insurance in the General Liability Declarations are amended to

include the following Limit: Combined Total Aggregate Limit Cap:

$10,000,000

B. For all sums which the insured becomes legally obligated to pay as damages

caused by "occurrences" under Section I- Coverage A … which can be

attributed only to operations at a single designated "location" shown in the

Schedule above:

1. A separate Designated Location General Aggregate Limit applies

to each designated "location", and such limit is equal to the amount

of the General Aggregate Limit shown in the Declarations,

provided that the Combined Total Aggregate Limit Cap is the most

we will pay under this Coverage Part for the sum of all Limits of

Insurance as set forth in SECTION III, regardless of the number of

your designated "locations" shown above in the schedule.

….

[Dkt. 43-2 at 86]. The “Designated Locations” are defined by reference to “bordereaus on file

with company.” [Id.]. The parties agree that the bordereau is the list of Subscribers. [Dkt. 43-1

at 13; Dkt. 52 at 23]. The parties also agree that, under the All Subscribers Aggregate, Aspen

must cover $10 million at most for all claims against all Subscribers, and up to $2 million in

aggregate claims against each Subscriber.1

b. The Underlying DBD Litigation and the Present Dispute

One Subscriber was Defendant Dive Bar Diva (“DBD”) which owns and operates The

Alibi Room, a bar located on the White Horse Pike in Waterford, New Jersey. [Compl ¶ 7].

Since October 17, 2019, DBD has been the defendant in a wrongful death and survival action in

the New Jersey Superior Court (the “DBD Litigation”). [Compl. ¶ 13]. Plaintiff in the DBD

Litigation is the surviving wife of a deceased Alibi Room patron. She alleges that, on February

19, 2016, Alibi Room staff served her husband past the point of intoxication, and that DBD’s

1 Paragraph B.1 states that the “separate Designated Location General Aggregate Limit” which

applies to each Subscriber is “equal to the amount of the General Aggregate Limit shown in the

Declarations.” As noted above, the “General Aggregate Limit” in the “Commercial General

Liability Declarations” is $2 million. Thus, the aggregate per-Subscriber limit is $2 million.

conduct caused her husband to crash his car in a fatal accident after leaving the Alibi Room.

[Compl. ¶¶ 14–19]. Trial in the DBD Litigation commences on March 21, 2022. [Dkt. 61].2

Pursuant to the Aspen Policy, Aspen has defended the DBD Litigation and claims against

other Subscribers. [See Compl. ¶¶ 38–39]. In an August 29, 2019 letter to Colony, Aspen

advised that “the $1 million liquor liability aggregate limit of the Aspen Policy is nearing

exhaustion in connection with various liquor liability claims throughout the HSS Program.”

[Dkt. 4, Compl. Exh. D]. Aspen advised Colony, HSS, and other insureds that they should begin

to coordinate “further handling of the [DBD Litigation] and other pending liquor liability

claims….” [Id.]. Central to this matter is Aspen’s position that it must only insure the first

$1,000,000 in aggregate liquor liability claims against all 205 Subscribersf.

Colony responded by stating that the Aspen Policy requires Aspen to insure “each

location” for the first $1,000,000 in liquor liability claims and must provide $10,000,000 in

aggregate liquor liability coverage. [Dkt. 4, Compl. Exh. F]. Aspen repeated its position in a

November 18, 2019 response letter to Colony and indicated that “the coverage available under

the Aspen Policy appears to be insufficient to fully cover the [DBD Litigation].” [Dkt. 4, Compl.

Exh. G].

Colony filed this lawsuit seeking, among other things, a declaration that Aspen must

provide $1 million in liquor liability coverage for each Subscriber, and that this $1 million per-

Subscriber limit applies to the DBD Litigation. [Count I, Compl. ¶¶ 50–59]. On April 23, 2021,

the Court denied Aspen’s motion to dismiss Colony’s complaint for lack of subject matter

jurisdiction after rejecting Aspen’s argument that the case is not ripe for adjudication. [Dkt. 19,

2 The parties’ briefing indicates that trial would commence in October 2021, but Counsel later

indicated that trial has been delayed until March 21, 2022. [Dkt. 61].

20]. Colony then filed an amended complaint, adding HSS and AGLIC as parties after omitting

them from the original complaint. [Dkt. 21].

On July 23, 2021, Colony filed the present Motion for Judgment on the Pleadings.

Colony seeks an order stating that the claims alleged in the DBD Litigation “are subject to a $1

Million limit under the Aspen Policy’s General Commercial General Liability Coverage Part”

and that Colony “has no obligation to provide excess liability coverage” until the DBD Litigation

exhausts Aspen’s $1 million in per-Subscriber liquor liability coverage. [Dkt. 43-3]. In its

response and cross motion, AGLIC agrees that Aspen must provide $1 million in liquor liability

coverage in the DBD Litigation, but also argues that AGLIC has no coverage obligations until

Aspen’s $1 million liquor liability coverage limit and Colony’s $2 million coverage obligations

have been exhausted. [Dkt. 46-2 at 14–18]. Aspen does not opine on Colony’s or AGLIC’s

coverage obligations but maintains that the Aspen Policy only requires Aspen to cover $1 million

in aggregate liquor liability claims against all Subscribers, which have been exhausted in part by

liquor liability claims against other Subscribers. [Dkt. 52].

II. Legal Standard

“A motion for judgment on the pleadings under Rule 12(c) ‘is analyzed under the same

standards that apply to a Rule 12(b)(6) motion.’” Wolfington v. Reconstructive Orthopaedic

Assocs. II PC, 935 F.3d 187, 195 (3d Cir. 2019) (Revell v. Port Auth. of N.Y. & N.J., 598 F.3d

128, 134 (3d Cir. 2010)). “A motion for judgment on the pleadings will be granted ... if, on the

basis of the pleadings, the movant is entitled to judgment as a matter of law.” DiCarlo v. St.

Mary Hosp., 530 F.3d 255, 262 (3d Cir. 2008) (citing Allah v. Brown, 351 F. Supp. 2d 278, 280

(D.N.J. 2004)). Under Rule 12(c) “‘judgment will not be granted unless the movant clearly

establishes that no material issue of fact remains to be resolved and that [the movant] is entitled

to judgment as a matter of law.’” Rosenau v. Unifund Corp., 539 F.3d 218, 221 (3d Cir. 2008)

(quoting Jablonski v. Pan Am. World Airways, Inc., 863 F.2d 289, 290–91 (3d Cir. 1988)).

“[The Court] must view the facts presented in the pleadings and the inferences to be drawn

therefrom in the light most favorable to the nonmoving party.” Id.

III. Analysis

a. Choice of Law

Before reviewing the merits of Colony’s motion and AGLIC’s cross motion, the Court

must conduct a choice-of-law analysis to determine which state’s law applies to the present

dispute. “A federal court exercising diversity jurisdiction is to apply the choice-of-law rules of

the forum state.” Gen. Ceramics Inc. v. Firemen's Fund Ins. Cos., 66 F.3d 647, 652 (3d Cir.

1995) (citing Shuder v. McDonald's Corp., 859 F.2d 266, 269 (3d Cir. 1988)). Here, the Court

must apply New Jersey’s choice-of-law rules. “New Jersey courts apply the two-pronged ‘most

significant relationship’ test of the Restatement (Second) of Conflict of Laws.” Curtiss-Wright

Corp. v. Rodney Hunt Co., 1 F. Supp. 3d 277, 283 (D.N.J. 2014) (citing P.V. v. Camp Jaycee,

962 A.2d 453 (N.J. 2008)).

The first step in this two-part test “is to determine whether an actual conflict exists”

between the law of the states with an interest in the case. P.V., 962 A.2d at 460. “That is done

by examining the substance of the potentially applicable laws to determine whether ‘there is a

distinction’ between them.” Id. (quoting Lebegern v. Forman, 471 F.3d 424, 430 (3d Cir.

2006)). “If there is no actual conflict, the analysis ends and the law of the forum state applies.”

Curtiss-Wright Corp, 1 F. Supp. 3d at 283 (citing Rowe v. Hoffman–La Roche, Inc., 917 A.2d

767 (N.J. 2007)). If a conflict exists, step two requires courts to “determine which jurisdiction

has the ‘most significant relationship’ to the claim.” Id. (citing P.V., 962 A.2d 453). New Jersey

courts apply the factors set forth in Sections 63 and 1884 of the Restatement (Second) of Conflict

of Laws to determine the most significant relationship. See Cont'l Ins. Co. v. Honeywell Int'l,

Inc., 188 A.3d 297, 315 (N.J. 2018). Section 193, which applies to “contracts of fire, surety or

casualty insurance,” is also relevant.5 See Gilbert Spruance Co. v. Pa. Mfrs. Ass'n Ins. Co., 629

A.2d 885, 888 (N.J. 1993).

3 Section 6 provides

[T]he factors relevant to the choice of the applicable rule of law include

(a) the needs of the interstate and international systems,

(b) the relevant policies of the forum,

(c) the relevant policies of other interested states and the

relative interests of

those states in the determination of the particular issue,

(d) the protection of justified expectations,

(e) the basic policies underlying the particular field of law,

(f) certainty, predictability and uniformity of result, and

(g) ease in the determination and application of the law to be

applied.

4 Section 188 applies where parties to a contract have “not made an effective choice of law”

determination in the contract. Cont'l Ins. Co., 188 A.3d at 315. Section 188 instructs courts to

consider the following contacts when applying § 6 factors:

(a) The place of contracting,

(b) The place of negotiation of the contract,

(c) The place of performance,

(d) The location of the subject matter of the contract, and

(e) The domicil, residence, nationality, place of incorporation and

place of business of the parties.

5 Section 193 states

The validity of a contract of fire, surety or casualty insurance and

the rights created thereby are determined by the local law of the

state which the parties understood was to be the principal location

of the insured risk during the term of the policy, unless with

respect to the particular issue, some other state has a more

significant relationship under the principles stated in § 6 to the

transaction and the parties, in which event the local law of the

other state will be applied.

Colony and AGLIC agree that “two states that arguably have an interest in having their

law applied to the interpretation of the Aspen Policy are New Jersey and Pennsylvania.” [Dkt.

43-1 at 17; see also Dkt. 46-2 at 9]. Both argue that New Jersey law should govern because

relevant New Jersey and Pennsylvania contract law do not conflict. [Dkt. 43-1 at 17; Dkt. 46-2

at 9].

Aspen argues that a choice-of-law analysis is premature because Aspen’s contract with

HSS implicates a “complex” web of relationships between HSS and the Shared Risk Program’s

200+ members which are located in New Jersey, New York, Pennsylvania, and elsewhere. [Dkt.

52 at 16–17]. Aspen argues that discovery concerning these other Subscribers is required before

the Court can determine which state has the most significant relationship to this litigation. [Id.].

Alternatively, Aspen argues that Pennsylvania has the most significant interest in this case and

that Pennsylvania law should govern. [Id.].

The Court rejects Aspen’s argument. Aspen does not identify an interested state whose

contract law conflicts with New Jersey law, and therefore skips the first step of New Jersey’s

choice-of-law analysis altogether.6 Instead, Aspen improperly analyzes Restatement factors

Comment B to § 193 states, in part

The location of the insured risk will be given greater weight than

any other single contact in determining the state of the applicable

law provided that the risk can be located, at least principally, in a

single state. Situations where this cannot be done, and where the

location of the risk has less significance, include … where the

policy covers a group of risks that are scattered throughout two or

more states.

6 This omission is glaring because Aspen acknowledges that it maintains a “bordereau” of

Subscribers as described in the Aspen Policy and acknowledges that these Subscribers reside in

New Jersey, Pennsylvania, New York, and elsewhere. [Dkt. 52 at 23 n.5]. Despite having

Subscriber locations available to it, Aspen does not explain why it could not locate an interested

state whose contract law conflicts with New Jersey contract law.

relevant to a “most significant relationship” determination which are properly considered at step

two of the analysis. Because Aspen fails to affirmatively show an “actual conflict” exists, the

Court cannot consider the state interest factors relevant step two of the conflict-of-law analysis.

Curtiss-Wright Corp., 1 F. Supp. 3d at 283 (“If there is no actual conflict, the analysis ends and

the law of the forum state applies.”).

Similarly, Aspen has not identified a single point of law that varies from state to state that

could affect the outcome of the present issue. Aspen does not dispute that the Court’s task here

is to determine Aspen’s coverage obligations by interpreting the Aspen Policy’s plain language.

This is a straight-forward contract interpretation issue based on the parties’ intent “as manifested

by the terms used in the written insurance policy.” Donegal Mut. Ins. Co. v. Baumhammers, 938

A.2d 286 (Pa. 2007) (citing 401 Fourth Street, Inc. v. Investors Ins. Grp., 879 A.2d 166, 171 (Pa.

2005)); Bohler-Uddeholm Am., Inc. v. Ellwood Grp., Inc., 247 F.3d 79, 92 (3d Cir. 2001)

(observing that it is “‘firmly settled’” that “‘the intent of the parties to a written contract is

contained in the writing itself.’” (quoting Krizovensky v. Krizovensky, 624 A.2d 638, 642 (Pa.

Super. 1993))).7 The Court need not consider nuanced legal rules or exceptions adopted in some

states but not others. Cf. Pfizer, Inc. v. Emps. Ins. of Wausau, 712 A.2d 634, 640 (N.J. 1998)

(explaining how state-specific interpretations of “sudden and accidental” exceptions to pollution

exclusion clauses in insurance contracts created a conflict of law issue). The Court will not

delay consideration of the present dispute based on the mere possibility that a Subscriber resides

in a state that does not apply “firmly settled” contract interpretation principles.8 See Pfizer, 879

7 See also Crawford v. New Jersey Transit Employee's Ret. Plan, No. A-4855-09T3, 2011 WL

1675090, at *3 (N.J. Super. Ct. App. Div. May 5, 2011); Pacifico v. Pacifico, 920 A.2d 73, 77

(N.J. 2007); First Montauk Sec. Corp. v. Menter, 26 F. Supp. 2d 688, 689 (S.D.N.Y. 1998).

8 It is worth noting that DBD is the only Subscriber party to this litigation. Aspen has not cited a

case stating that, at step one of the choice-of-law analysis, courts must consider potential

A.2d at 640–41 (acknowledging that potentially interested states in an insurance dispute

concerning toxic waste included New Jersey, New York, and “the states where the waste has

come home to rest” and acknowledging conflict between relevant New Jersey and New York

law, but conducting choice-of-law analysis based on New Jersey and New York law alone after

observing that “[a]lthough there are variations on these views, we may assume that the laws of

the waste sites will be similar to either New York law or New Jersey law.”).

The contract law of New Jersey, Pennsylvania, and New York—which Aspen has cited

as states where Shared Risk Programs reside—support the Court’s approach. The law of each of

these states requires courts to interpret insurance contracts by focusing on their plain language,

as with any other contract. Porco v. Lexington Ins. Co., 679 F. Supp. 2d 432, 435 (S.D.N.Y.

2009) (“Insurance policies are, in essence, creatures of contract, and accordingly, subject to

principles of contractual interpretation.”) (quoting In re Covert, 761 N.E.2d 571, 576 (N.Y.

2001))); Chubb Custom Ins. Co. v. Prudential Ins. Co. of Am., 948 A.2d 1285, 1289 (N.J. 2008)

(“In attempting to discern the meaning of a provision in an insurance contract, the plain language

is ordinarily the most direct route.” (citing Zacarias v. Allstate Ins. Co., 775 A.2d 1262 (N.J.

2001))); Donegal Mut. Ins. Co., 938 A.2d 286. See also Walters v. Am. Home Assur., No.

CIV.A. 09-4637 FLW, 2011 WL 4409170, at *12 (D.N.J. Sept. 21, 2011) (“Thus, there is no

actual conflict regarding how [New Jersey and Pennsylvania] interpret[] policies.”).

Aspen also directs the Court to ongoing litigation between Aspen and HSS in the Eastern

District of Pennsylvania where Judge DuBois recently declined to rule on a choice-of-law issue

concerning Aspen’s contracts with HSS on a motion for partial summary judgment. [Dkt. 52 at

conflicts with the law of states where non-parties with a remote interest in the outcome of the

litigation reside. The Court is not aware of any such case.

16]; Aspen Specialty Ins. Co. v. Hosp. Supportive Sys., LLC, No. CV 16-1133, 2021 WL

3403416 (E.D. Pa. Aug. 3, 2021). According to Aspen, Judge DuBois declined to rule on the

issue in part because the record was too sparse to decide the choice-of-law issue. [Dkt. 52 at 16].

Aspen argues that the Court here should follow Judge DuBois’s approach.

Aspen’s argument is specious. First, the summary judgment motions at issue in that case

concerned whether Aspen was legally required to notify “additional named insured” parties of

Aspen’s intent to cancel its coverage to HSS. Aspen, 2021 WL 3403416 at *1. They did not

involve an interpretation of the Aspen Policy or Aspen’s coverage requirements as outlined in

that policy. Second, Judge DuBois had granted leave to file summary judgment motions on this

single issue based an assumed agreement among the parties that Pennsylvania law would govern

the inquiry. Id. at *4. Judge DuBois declined to consider the choice-of-law issues because they

exceeded the scope of his order. Third, and most importantly, Aspen argued that Pennsylvania

law should apply in that case. Id. at *3 (“Aspen argues that … Pennsylvania law applies to the

cancellation of all policies….”).

Ultimately, “‘[a] court has to make a choice of law decision in an actual case only …

when the laws of the involved states differ on the point in issue.’” Pfizer, 712 A.2d at 640

(quoting Robert A. Sedler, A Real World Perspective on Choice of Law, 48 Mercer L. Rev. 781,

783 (1997)). Because Aspen has not shown that such a conflict exists, and because no conflict

exists between New Jersey law and the contract law of New Jersey or New York, the Court will

apply New Jersey law to the present dispute.

b. Contract Interpretation

As noted above, the present dispute concerns Aspen’s liquor liability coverage

obligations under the Aspen Policy. Colony and AGLIC argue that the Liquor Endorsement and

the All Subscribers Aggregate provisions of the Aspen Policy require Aspen to insure up to $1

million in liquor liability claims for each Subscriber, including DBD. Aspen disagrees.

Resolving this dispute requires the Court to interpret the Aspen Policy. “Contract

interpretation is a question of law” for courts. Hess Corp. v. ENI Petroleum US, LLC, 86 A.3d

723, 727 (N.J. Super. Ct. App. Div. 2014) (citing Selective Ins. Co. of Am. v. Hudson E. Pain

Mgmt. Osteopathic Med. & Physical Therapy, 46 A.3d 1272 (N.J. 2012)). When interpreting an

insurance contract, like any other contract, “courts first look to the plain meaning of the language

at issue.” Oxford Realty Grp. Cedar v. Travelers Excess & Surplus Lines Co., 229 N.J. 196, 207,

160 A.3d 1263, 1270 (2017) (citing Chubb Custom Ins. Co., 948 A.2d 1285). “If the language is

clear, that is the end of the inquiry.” Chubb Custom Ins. Co., 948 A.2d at 1289 (citing Zacarias,

775 A.2d 1262). Language in an insurance contract is “clear,” and therefore not ambiguous,

unless “‘the phrasing of the policy is so confusing the average policy holder cannot make out the

boundaries of the coverage.’” Pennbarr Corp. v. Ins. Co. of N. Am., 976 F.2d 145, 151 (3d Cir.

1992) (quoting Am. White Cross Lab., Inc. v. Continental Ins. Co., 495 A.2d 152, 157 (N.J.

Super. Ct. App. Div. 1985)). Courts must strive “to give effect to the whole policy, not just one

part of it. A construction that gives reasonable meaning to all of the contract's provisions is

preferred to one which leaves a portion of the writing useless or inexplicable.” Id. (citations and

quotations omitted).

i. Liquor Endorsement

Colony and AGLIC argue that the Liquor Endorsement’s $1 million “liquor each location

occurrence” limit and $1 million “liquor each location aggregate” limit require Aspen to provide

$1 million worth of coverage in the DBD Litigation.9 [Dkt. 43-1 at 21–22; Dkt. 46-2 at 13–14].

Aspen argues that Colony and AGLIC improperly ignore the Liquor Endorsement’s third

limit, namely, the $1 million “liquor general aggregate limit.” [Dkt. 52 at 24–25]. According to

Aspen, the “liquor general aggregate limit” sets a $1 million total coverage limit for all liquor

claims against any and all Subscribers. Aspen maintains that other Subscribers incurred liquor

liability which exhausted some of the $1 million in aggregate coverage available to all

Subscribers and, therefore, to DBD. [Id. at 29]. Aspen emphasizes that this arrangement is part

and parcel “shared risk” that HSS’s clients undertake when they join the Shared Risk Program.

[Id.].

The Liquor Endorsement is comprised of three “Additional Paragraphs” and a coverage

limit schedule. Additional Paragraph 1 of the Liquor Endorsement states that the $1 million

“liquor general aggregate limit” listed in the coverage limit schedule “is the most we will pay

under this policy for all damages … included within the ‘liquor hazard’ that is sustained by

one or more persons or organizations.” [Dkt. 43-2 at 84] (emphasis added). By its plain

meaning, Additional Paragraph 1 establishes a maximum amount of coverage that Aspen may

have to provide for “all damages … included within the ‘liquor hazard’” because it states that $1

million is “the most” that Aspen will pay. Most, Merriam-Webster, https://www.merriam-

webster.com/dictionary/at%20most (“the greatest amount;” “an extreme limit”). In other words,

“the most” that Aspen must pay for “all” liquor liability claims is $1 million.

9 To be clear, there is no dispute that the injuries alleged in and costs associated with the DBD

Litigation qualify as insurable “liquor hazards” under the Liquor Endorsement. The parties only

dispute the amount of liquor liability coverage available under the Aspen Policy.

The remaining paragraphs in the Liquor Endorsement are equally clear that the $1 million

“liquor general aggregate limit” set forth in Additional Paragraph 1 caps the liquor coverage

available to each Subscriber and for each occurrence. Additional Paragraph 2 of the Liquor

Endorsement states that the $1 million “liquor each location aggregate limit” listed in the

coverage limit schedule is “the most we will pay under this policy for all damages … included

within the ‘liquor hazard’ at each location to which this insurance applies….” [Dkt. 43-2 at

85] (emphasis added). By its plain meaning, Additional Paragraph 2 establishes a maximum

amount of liquor liability coverage that Aspen may have to provide for each Subscriber because

it states that $1 million is “the most” that Aspen will pay for “liquor hazards” at any single

location. Most, Merriam-Webster, https://www.merriam-webster.com/dictionary/at%20most

(“the greatest amount;” “an extreme limit”).

However, Additional Paragraph 2 does not guarantee $1 million in liquor coverage to

each Subscriber or establish a per-Subscriber liquor coverage minimum. Instead, Additional

Paragraph 2 states that the $1 million per-Subscriber limit is “subject to” the $1 million “liquor

general aggregate limit” set forth in Additional Paragraph 1. The dictionary definition and

ordinary meaning of “subject to” is “affected by or possibly affected by.” Subject To, Merriam-

Webster, https://www.merriam-webster.com/dictionary/subject%20to. See also Mildenhall, LLC

v. Higginbotham, 83 Va. Cir. 256 (2011) (interpreting “subject to” to mean “contingent upon”).

Thus, Additional Paragraph 2 plainly acknowledges that the $1 million maximum liquor

coverage available to each Subscriber is “subject to” and may be “affected by” the $1 million

maximum available to all Subscribers in the aggregate. Though the Liquor Endorsement does

not say so explicitly, liquor claims against one Subscriber necessarily reduce the amount of

liquor liability coverage available to that Subscriber and to all other Subscribers.10 This

interpretations gives logical and “reasonable meaning” to the “the most” language in Additional

Paragraphs 1 and 2, and the “each location” and “subject to” language in Additional Paragraph 2.

Pennbarr Corp., 976 F.2d at 151 (citations and quotations omitted).

Additional Paragraph 3 of the Liquor Endorsement extends this logical relationship to

individual liquor hazard occurrences. Additional Paragraph 3 states that the $1 million “liquor

each location occurrence limit” “is the most we will pay under this policy for damages …

included within the ‘liquor hazard’ at each location to which this insurance applies … as the

result of the selling, serving or furnishing of any alcoholic beverage(s) to any one person.” [Dkt.

43-2 at 85]. As with Additional Paragraph 2, Additional Paragraph 3, sets a $1 million per-

occurrence coverage maximum, but does not guarantee $1 million in per-occurrence coverage.

Additional Paragraph 3 further states that this “each location occurrence limit” is “[s]ubject to

Additional Paragraphs 1. & 2. above.” As in Additional Paragraph 2, this “subject to” language

means that the $1 million maximum coverage available per occurrence may be affected by the $1

million per-Subscriber and $1 million aggregate limits. Thus, if a single Subscriber incurs

liability through multiple “occurrences,” the coverage provided in earlier occurrences will reduce

the amount of coverage available to that same Subscriber under Additional Paragraph 2 and all

other Subscribers in the aggregate under Additional Paragraph 1.11 Likewise, a Subscriber will

10 For example, assume Bar A and Bar B are the only Subscribers under the same terms

discussed above. On day 1 of the policy coverage period, Bar A incurs $100,000 in liquor

liability. Aspen covers the event. Because Bar B’s $1 million per-location liquor limit is

“subject to” the $1 million aggregate liquor limit, only $900,000 of liquor liability coverage is

available to Bar B. The contract’s plain language requires this result even though Bar B did not

itself exhaust any aggregate or per-location coverage.

11 For example, Bar A incurs $100,000 in liquor liability in Occurrence 1 and $100,000 in liquor

liability in Occurrence 2. Occurrence 3 occurs which will result in liquor liability to Bar A.

have less than $1 million available in per-occurrence coverage if that same Subscriber or any

other Subscriber previously incurred liquor liability.

As this analysis demonstrates, the Court agrees with Aspen that the Liquor Endorsement

only requires Aspen to provide $1 million in total liquor liability coverage, and that liquor

liability costs incurred by one Subscriber erode the amount of liquor liability coverage available

to all other Subscribers.

Colony and AGLIC resist this interpretation. They argue that the $1 million “liquor

general aggregate limit” set forth in Additional Paragraph 1 of the Liquor Endorsement does not

limit the “liquor each location” or “liquor each location occurrence” limits set forth in Additional

Paragraphs 2 and 3, respectively. [Dkt. 43-2 at 21–24; Dkt. 46-2 at 12–14]. They argue that

Aspen’s interpretation deprives the $1 million “each location” and “each location occurrence”

liquor liability limits of their plain meaning.

The Court disagrees. The “subject to” language in Paragraphs 2 and 3 expressly qualifies

the liquor liability coverage available to “each location” and for “each occurrence.” This

language clarifies that the per-Subscriber and per-occurrence limits are “subject to” the $1

million is total liquor coverage available to all Subscribers in the aggregate. While it may be

counterintuitive that $1 million per-occurrence and per-subscriber limits do not guarantee $1

million in liquor liability coverage to each Subscriber or for each event, Liquor Endorsement’s

plain language requires this interpretation. To find otherwise would strip the “subject to”

language in Additional Paragraphs 2 and 3 of its effect. See Penbarr Corp., 976 F.2d at 151

Only $800,000 in coverage is available to Bar A for Occurrence 3—despite the $1 million per-

occurrence limit—because Occurrences 1 and 2 reduced the per-location and aggregate liquor

coverage available. Likewise, after Occurrences 1 and 2, only $800,000 in liquor coverage is

available to Bar B for a single occurrence or multiple occurrences.

(“[I]t is [the court’s] responsibility to give effect to the whole policy, not just one part of it.”

(citations and quotations omitted)).

Colony and AGLIC also argue that only the $10 million general aggregate limit created

by the All Subscribers Aggregate restricts the amount of liquor liability coverage that Aspen

must provide for all Subscribers in the aggregate. [Dkt. 54 at 12; 46-2 at 14]. Under this

interpretation, ten Subscribers could incur $1 million each in liquor liability and exhaust all

coverage available under the Aspen Policy. Likewise, a single Subscriber could incur $1 million

of liquor liability in each of ten occurrences and exhaust Aspen’s coverage.

This interpretation violates a black-letter principle of contract interpretation. Additional

Paragraph 1 states that $1 million “is the most we will pay under this policy for all damages …

included within the ‘liquor hazard’….” [Dkt. 43-2 at 84], and Additional Paraphs 2 and 3 state

that the $1 million per-Subscriber and per-occurrence liquor limits are “subject to” this $1

million aggregate limit. Colony and AGLIC’s position would invalidate the “the most” language

in Additional Paragraph 1’s by requiring Aspen to cover more than $1 million in total liquor

liability claims. It would also invalidate the “subject to” language in Additional Paragraphs 2

and 3 by releasing per-Subscriber and per-occurrence liquor limits from the $1 million aggregate

limit. But contract law requires the Court to interpret contracts “‘to give meaning to all [their]

terms.’” In re Energy Future Holdings Corp., 842 F.3d 247, 256 (3d Cir. 2016) (quoting Barrow

v. Lawrence United Corp., N.Y.S.2d 363 (N.Y. App. Div. 1989)); accord Com. ex rel. Kane v.

UPMC, 129 A.3d 441, 464 (Pa. 2015) (“[A] contract must be interpreted to give effect to all of

its provisions. Thus, our Court will not interpret one provision of a contract in a manner which

results in another portion being annulled.” (citations and quotations omitted)); Heffron v. Adamar

of New Jersey, Inc., 270 F. Supp. 2d 562, 572 (D.N.J. 2003) (“[A]n interpretation [of an

agreement] which gives reasonable ... and effective meaning to all [of its] terms is preferred to an

interpretation which leaves a part unreasonable ... or of no effect.” (quoting Restatement

(Second) of Contracts, § 203(a))). This principle compels the Court to reject Colony and

AGLIC’s suggestion that Additional Paragraphs 2 and 3 guarantee $1 million in liquor liability

coverage to each Subscriber and for each occurrence, subject only to the All Subscriber

Aggregate’s $10 million cap on all liability claims.

ii. All Subscribers Aggregate

Colony and AGLIC also argue that Aspen’s interpretation of Liquor Endorsement

conflicts with the All Subscribers Aggregate, which establishes a $2 million aggregate coverage

limit for all claims against each Subscriber, and a $10 million aggregate limit for all claims

against all Subscribers. They argue that Aspen cannot square its proposed $1 million aggregate

liquor liability with its $2 million aggregate per-Subscriber coverage obligations. [Dkt. 43-1 at

23–27]. The Court disagrees and finds that the limits established in the All Subscribers

Aggregate harmonize with the limits set forth in the Liquor Endorsement.

Although the parties agree that the All Subscribers Aggregate establishes a $2 million

per-Subscriber aggregate coverage limit and a $10 million coverage limit for all claims against

all Subscribers, the Court must parse this endorsement’s language to demonstrate how it

comports with the Liquor Endorsement. The All Subscribers Aggregate amends the Base Policy

to include a $10 million “Combined Total Aggregate Limit Cap.” [Dkt. 43-2 at 86]. Paragraph

B of the All Subscribers Aggregate states that

For all sums which the insured becomes legally obligated to pay as

damages caused by “occurrences” under Section I – Coverage A

…. A separate Designated Location General Aggregate Limit

applies to each designated “location”, and such limit is equal to the

amount of the General Aggregate Limit shown in the Declarations,

provided that the [$10 million] Total Aggregate Limit Cap is the

most we will pay under this Coverage Part for the sum of all

Limits of Insurance….

[Dkt. 43-2 at 86].12

Critically, Paragraph B applies to liability incurred under “Section I – Coverage A” of the

Base Policy. Section I – Coverage A contains the Liquor Exclusion which, again, states that

“[t]his insurance does not apply to … Liquor Liability.” [Dkt. 43-2 at 11]. The All Subscribers

Aggregate does not explicitly refer to or modify the Liquor Exclusion. Nor does it expressly

state that it applies to liquor liability claims. Thus, the only way that the $2 million “Designated

Location General Aggregate Limit” could apply to liquor hazard claims at all is through the

Liquor Endorsement, which provides the sole basis for liquor hazard coverage in the Aspen

Policy by amending the Liquor Exclusion. But, as discussed above, the Liquor Endorsement

states that $1 million is “the most” that Aspen will pay for all liquor hazard claims against all

Subscribers. Reading the All Locations Aggregate and Liquor Endorsement together, each

Subscriber has a $2 million aggregate coverage limit and may exhaust up to $1 million of this

aggregate through liquor hazard claims, but liquor hazard claims against any Subscriber will

erode the amount of liquor liability coverage available. Aspen supports this interpretation. [See

Dkt. 52 at 26–27].

Colony’s disagreement with this reading of the All Subscribers Aggregate relies on an

unreasonable interpretation of the term “separate” in Paragraph B. Colony argues that, under

Paragraph B, “each [Subscriber] has a separate [$2 million] general aggregate limit … that

cannot be eroded or exhausted by payments for the liquor liabilities of other insureds at other

locations.” [Dkt. 43-1 at 26 (emphasis in original)]. On this interpretation, the word “separate”

12 The “General Aggregate Limit shown in the Declarations” is $2 million, so Paragraph B

establishes a $2 million “Designated Location General Aggregate Limit” for each Subscriber.

in Paragraph B creates a $2 million per-Subscriber coverage limit “separate” and apart from the

$1 million aggregate liquor liability limit set forth in the Liquor Endorsement, but which applies

to liquor liability claims. The Base Policy’s $1 million general per-occurrence limit would then

require Aspen to cover $1 million in the DBD Litigation.

Colony’s interpretation of the word “separate” invents a basis for liquor hazard coverage

where none exists in the contract’s plain language. The All Subscribers Aggregate does not

define the scope of coverage or list covered events “separate” from the Base Policy. Neither Part

B nor any other language in the All Subscribers Aggregate provides a “separate” contractual

basis for liquor liability coverage. Instead, the All Subscribers Aggregate refers explicitly to

“Section I – Coverage A,” which only covers liquor liability because of the Liquor Endorsement.

The Liquor Endorsement “modifies” the Base Policy’s Liquor Exclusion to include liquor hazard

coverage, but only “to the extent of the coverage provided by this Endorsement.” [Dkt. 43-2 at

84]. The Liquor Endorsement includes a $1 million aggregate liquor liability limit for all claims

against all Subscribers, which Paragraph B does not modify.

Thus, whether Colony interprets “separate” to mean that Paragraph B provides an

independent basis for $1 million per-Subscriber liquor liability, or to sidestep the Liquor

Endorsement’s $1 million aggregate liquor limit, its interpretation finds no support in the Aspen

Policy’s plain language. The Court cannot rewrite the All Subscribers Aggregate to require

Aspen to exceed the Liquor Endorsement’s $1 million aggregate liquor liability limit. Kieffer v.

Best Buy, 14 A.3d 737, 743 (N.J. 2011) (“The judicial task is simply interpretative; it is not to

rewrite a contract for the parties better than or different from the one they wrote for themselves.”

(citations omitted)); see also Pennbarr Corp. 976 F.2d at 151 (“A construction that gives

reasonable meaning to all of the contract's provisions is ‘preferred to one which leaves a portion

of the writing useless or inexplicable.’” (quoting Caruso v. John Hancock Mut. Life Ins. Co., 57

A.2d 359, 360 (N.J. Ct. App. 1948)).

iii. Ambiguity

Finally, Colony argues that “to the extent that Aspen intended to provide liquor liability

coverage with a single $1 Million limit to be shared jointly by more than 205 insureds on a ‘first

come, first served’ basis, the onus was on Aspen to draft a policy that clearly communicated that

intent.” [Dkt. 43-2 at 24]. Similarly, Colony and AGLIC argue that, at best, the Aspen Policy is

ambiguous with respect to Aspen’s liquor liability coverage obligations. [Dkt. 43-1 at 23–24];

Dkt. 46-2 at 14]. They argue that any uncertainty must be resolved in favor of coverage. [Dkt.

43-2 at 24; Dkt. 46-2 at 14].

The Court agrees that piecing together the Aspen Policy’s various coverage limits and

endorsements is no simple task. But “[a]n insurance policy … is not ambiguous merely because

it is complex.” Pennbarr Corp., 976 F.2d at 151 (citing Transamerica Ins. Co. v. Keown, 451 F.

Supp 397, 400 (D.N.J.1978)); accord Sayles v. G & G Hotels, Inc., 57 A.3d 1129, 1134 (N.J.

Super. Ct. App. Div. 2013) (“The general principle that ambiguous contractual … agreements

should be construed against [one party] does not require a search for ambiguity in every complex

provision.”). The pieces ultimately come together to form a coherent whole that clearly

establishes a $1 million aggregate liquor hazard limit, a limit which caps Aspen’s per-occurrence

and per-Subscriber liquor hazard coverage obligations and qualifies Aspen’s $2 million per-

Subscriber aggregate coverage obligations. Consequently, the Court declines to “‘engage in a

strained construction to support the imposition of liability’ or write a better policy” for HSS,

Colony, or AGLIC’s benefit. Oxford Realty Grp. Cedar, 160 A.3d at 1270 (quoting Chubb

Custom Ins. Co., 948 A.2d 1285).

Moreover, AGLIC and Colony are incorrect that the Court must resolve any doubt in

favor of coverage in this case. “Ordinarily, our courts construe insurance contract ambiguities in

favor of the insured… Sophisticated commercial insureds, however, do not receive the benefit of

having contractual ambiguities construed against the insurer.” Oxford Realty Grp. Cedar, 160

A.3d at 1270–71 (citations and quotations omitted)). AGLIC and Colony are not “insureds”

under the Aspen Policy and are therefore not entitled to deference. Moreover, HSS, as the

administrator of a complex and pooled interstate insurance program, undoubtedly qualifies as a

“sophisticated commercial insured” that is not entitled to benefit from any ambiguity.

Ultimately, the Court agrees with Aspen that the Aspen Policy only requires Aspen to

provide $1 million in aggregate coverage for all “liquor hazard” claims against all Subscribers.

The Court also agrees that the amount of liquor hazard coverage that Aspen must provide in the

DBD Litigation depends on the amount of liquor hazard coverage exhausted through claims

against other Subscribers. At this juncture, it is unclear how much of the $1 million in aggregate

liquor liability coverage remains for the policy period at issue, or if liquor hazard claims other

than the DBD Litigation may deplete the policy limits. Thus, the Court will not decide the

amount of coverage that Aspen must provide in the DBD Litigation.

c. Aspen’s Reformation Argument

Aspen argues that “significant issues of reformation [would] arise” if the Court agrees

with Colony’s and AGLIC’s interpretation of the Aspen Policy and finds that Aspen must

provide up to $1 in million liquor liability coverage in the DBD Litigation. [Dkt. 52 at 30]. In

the event of an adverse ruling, Aspen argues that it is entitled to discovery to investigate these

reformation issues. [Id. at 35]. However, because the Court agrees with Aspen’s interpretation

of the Aspen Policy, the Court need not consider this issue.

d. Colony’s and AGLIC’s Requests for Relief

Colony and AGLIC have asked the Court to decide when their respective coverage

obligations begin under the Colony Policy and the AGLIC Policy, respectively.13 However, both

requests generally assume that Aspen must pay $1 million in coverage in the DBD litigation, and

the parties’ briefing on the Colony and AGLIC Policies is minimal. Colony only analyzes the

Aspen Policy. AGLIC only briefly addresses its own policy and does not analyze the Colony

Policy. [Dkt. 46-2 at 15–18]. The Court will therefore limit its ruling to the Aspen Policy and

declines to determine Colony’s and AGLIC’s coverage obligations until those issues have been

fully briefed.

IV. Conclusion

For the reasons discussed above, the Court will deny Colony’s Motion for Judgment on

the Pleadings and AGLIC’s Cross-Motion for Judgment on the Pleadings. An appropriate order

will follow.

September 30, 2021 /s/ Joseph H. Rodriguez

Joseph H. Rodriguez, USDJ

13 For example, Colony asks the Court to find that “Colony has no obligation to provide excess

liability coverage, if at all, unless and until the $1 Million limits of the Aspen Policy have been

exhausted by payments in connection with claims asserted against DBD.” [Dkt. 43-1 at 22].