Late Night Fiesta Leaves Restaurant Holding the Bag

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The plaintiff, Mount Vernon Fire Insurance Company (Mount Vernon), sought a declaration that it was not required to handle or pay a certain insurance claim. The dispositive issue before the court is whether the insured, El Rancho De Pancho LLC (El Rancho De Pancho), violated the terms of its agreement with Mount Vernon on October 9, 2011, giving rise to the injury upon which the insurance claim in question is based. The parties’ dispute in the instant action, is rooted in the following warranties: the establishment closes by 2:30 AM daily; alcohol sales cease by 2:00 AM; the insured does not offer beer for less than $1.00; and the insured does not offer liquor or wine for less than $1.50.

On the date of loss, shortly after 2:00 a.m., a patron appeared at the door of El Rancho De Pancho with three friends. At the time, the restaurant was closed to the public; however, the acting manager of El Rancho De Pancho at the time let them in. Once inside, employees of El Rancho De Pancho provided beer, tequila, and margaritas to the group and did not charge anything for them.  Sometime after 3:30 a.m. the group left. One of the patrons drove his jeep off the road and subsequently died from his injuries.

The estate argued that the warranty requiring that the establishment “close by 2:30 AM daily” merely required that El Rancho De Pancho have its restaurant close, as a matter of its general business operation, before that time. The court held, however, that the fact that this court would have to add language to clarify that meaning, however, as opposed to simply interpreting the warranty to mean that every day the restaurant must close by 2:30 a.m., would suggest that this is not the preferred interpretation. In addition, the language in which the warranties are set supports the interpretation that 2:30 a.m. daily meant each day and not merely as a matter of general practice. By admitting people into the restaurant after 2:00 a.m., the court held, and serving them alcohol until at least 3:00 a.m., it cannot be said that on October 9, 2011 El Rancho De Pancho was closed by 2:30 a.m.

These facts, taken together with that under Connecticut law, “[a]s to compliance with a warranty in a contract of insurance, the general rule is that its terms must be strictly and literally fulfilled or the contract is vitiated,” the court barred coverage under the subject policy