Judge Rules CGL Policy Off the Hook for $22M Sexual Assault Claim

Judge Rules CGL Policy Off the Hook for $22M Sexual Assault Claim

By Marisa Jeffrey

On January 17, 2017, U.S. District Judge, Judge David Godbey, ruled that Century Surety Co. is off the hook for a $22 million judgment awarded to a woman who filed suit against the owner of Pastazios Pizza Inc. for sexual assault. 

In April 2011, the owner of Pastazios (Ajredin “Danny” Deari) served the victim several rounds of alcoholic beverages under the pretenses of a job interview. The victim eventually lost consciousness and later awoke in a hotel room, where Deari sexually assaulted her. She was ultimately able to lock herself in the bathroom and Deari later fled the scene. 

Successful civil suit

Through post-assault testing, the victim learned she had been given rohypnol or “roofies” and that Deari had also infected her with herpes. Deari was criminally prosecuted for aggravated assault and eventually confessed to the assault in 2014. In mid-2015 the civil suit concluded with a judgment in the victim’s favor for close to $22 million. While the civil litigation was pending, Pastazios filed for bankruptcy and a creditors’ trust was established.

At the outset, Century provided a defense to Deari under a commercial general liability (CGL) policy, but eventually pulled the defense, filing a declaratory judgment action in the Northern District of Texas. Last year, the parties filed cross-motions for a declaration regarding coverage. 

Liquor liability exclusion

Judge Godbey, of the Northern District of Texas in Dallas, ruled on January 4 that the CGL policy at issue contained an applicable liquor liability exclusion that precluded coverage for bodily injury claims where alcohol is the proximate or contributing cause. The court further held that the policy’s intentional acts exclusion applied to bar coverage. 

The insured’s trustee in bankruptcy argued that: 

        (1) the conduct at issue fell within the liquor liability exclusion’s exception for products-completed operations, and 

        (2) that the “separation of insureds” clause should apply to split the victim’s negligence claim against Pastazios and intentional act claims against Deari.

The court was not persuaded by either argument, stating that: 

        (1) the intoxicants given to the victim were not Pastazios’ products, and were therefore not susceptible to the products-completed operations exception, and 

        (2) because Deari was Pastazios’ sole proprietor, his conduct was ultimately imputed to the restaurant. 

The ruling has already been appealed to the Fifth U.S. Circuit Court of Appeals.