In Scott v Kookmin Best Insurance Co., Case No. 23-1654 (3rd Cir. Jan. 29, 2024), the Third Circuit ruled that the insurer of a Philadelphia deli does not have to indemnify the owner for a $900,000 settlement between him and a man who sued after being stabbed on the premises, reasoning that the victim was barred from relitigating the same issues with the insurance company.
Here, Scott sued the David’s Deli in PA state court for injuries he sustained while patronizing the restaurant, which also served alcohol, when he was stabbed by an intoxicated patron. The deli’s insurer, Kookmin joined the suit as an additional defendant. The state trial court ruled that Kookmin had no duty to indemnify David under its insurance policy for liability that David may incur from Scott’s suit based on an “Assault & Battery” exclusion. Scott later sued Kookmin in federal court, alleging that Kookmin must indemnify David under the policy. The District Court found that Scott was precluded from relitigating that issue and granted KBIC’s motion to dismiss.
The genesis of Scott’s suit against Kookmin was his 2021 settlement with David for $900,000, where he dismissed the injury suit and took an assignment of any rights it had under the Policy. Scott notified Kookmin about the $900,000 settlement and demanded it indemnify David, but Kookmin never responded. In 2022, Scott sued KBIC in federal court for breach of contract. He alleged that Kookmin had a duty to indemnify David under the Policy’s liquor liability coverage provision.
The District Court granted Kookmn’s motion to dismiss for failure to state a claim. It found that the PA State court had already determined that Kookmin did not have a duty to indemnify David under the Policy, and thus Scott was precluded from relitigating that issue. The Third Circuit affirmed, based upon “[i]ssue preclusion, also known as collateral estoppel, [which] bars relitigation of issues adjudicated in a prior action.” Because Federal courts are required to give preclusive effect to state court judgments by virtue of the Full Faith and Credit Act, the Third Circuit affirmed.