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Liberty Corp. Capital, Ltd. v. Phi Omega Chapter et al. : US District Court : INSURANCE - standing regarding college alcohol death; but no coverage by insurance policy

1The following members of Patrick Kycias family are named
parties in both the state tort action and the present declaratory
judgment action: Patricks father, Julian Kycia; his mother, Rose
Marie Foley; and his two brothers, Adam and Julian Alexander Kycia.
The Court refers to these individuals as the Kycia Defendants.
2The following fraternity members are named defendants in both
the state tort action and the present declaratory judgment action:
Jason J. Morris, Christopher M. Sayre, James J. Sander, Nicholas R.
Gulmon, Marcus O. Carney, Raymond Joseph Ogren, Evan Michael Narog,
and Jesse A. Bridley. The Court refers to these fraternity members
as the Individual Defendants.
Liberty Corporate Capital, Ltd. )
v. ) ORDER
Phi Omega Chapter of Phi Sigma )
Kappa at Minnesota State )
University Moorhead; Jason J. )
Morris; Christopher M. Sayre; )
James J. Sander; Nicholas R. )
Gulmon; Marcus O. Carney; Raymond )
Joseph Ogren; Evan Michael Narog; )
Jesse A. Bridley; Julian Kycia, )
individually, and as trustee for )
the next of kin of Patrick Kycia; )
Rose Marie Foley; Adam Kycia; )
and Julian Alexander Kycia, a )
minor, by his father, Julian )
Kycia )
The tragic death of Patrick Kycia, a very young man, brings
this case to the Court. Mr. Kycia died after drinking with members
of Phi Sigma Kappa (PSK) fraternity at Minnesota State University
Moorhead (MSUM). Kycias family members1 filed tort claims in
Minnesota state court against certain fraternity members,2 the
Local Chapter of PSK, and its National Fraternity (Underlying
Plaintiff, Liberty Corporate Capital, Ltd., filed this action
seeking declaratory judgment that its general liability insurance
policy, held by the PSK National Fraternity, does not cover Patrick
Kycias death for either the Local Chapter or the Individual
Defendants. Plaintiff and the Kycia Defendants have filed crossmotions
for summary judgment on the coverage issue.
Plaintiffs motion is granted; defendants motion is denied.
I. Background
The parties agree the material facts are not in dispute.
A. The Insurance Policy
PSK, headquartered in Indianapolis, Indiana, is a national
social fraternity with approximately 79 chapters. In 2005, PSK
held insurance through the Fraternity and Sorority Insurance
Program. This policy, covering general liability, was underwritten
by multiple entities through Lloyds, London (Underwriters). The
lead underwriter is Liberty Corporate Capital, Ltd., of the United
Kingdom. The policy in effect when Patrick Kycia died was
negotiated between PSK representatives and the Underwriters in
2000. The policy particularly limited coverage for conduct arising
from alcohol abuse.
The insurance policy was Certificate No. 04JFR333-18-L
(Policy). This policy designated the PSK Grand Chapter
(National Fraternity) as the First Named Insured, with the PSK
Foundation, Inc., being the only other Named Insured.
Undergraduate members and local chapters are not named insureds.
The policy provided coverage for undergraduate members by an
endorsement under certain circumstances:
f. Each of the following entities or persons are
insureds, but only while acting in accordance with the
Named Insureds policies and procedures and their own
policies and procedures, and only while acting within the
scope of their duties, and only with respect to their
liability for activities performed by them on behalf of
the Named Insureds, or of insured Chapters,
Colonies, Housing Organizations or Alumni
(1) Chapters and Colonies
(2) Undergraduate Insureds
Policy, Who is Insured Endorsement, JFR-FSL-064.
The policy further states:
Undergraduate Insureds means: individuals who are
undergraduate collegiate students that are officers,
members, or member candidates, that are affiliated with
a Chapter or Colony whose affiliation with the Named
Insureds is acknowledged to exist by the governing body
of the First Named Insured at the time of loss.
Chapters and Colonies means: those collegiate
undergraduate organizations that are organized,
chartered, or recognized by and whose affiliation with
the Named Insured is acknowledged to exist by the
governing body of the First Named Insured at the time of
Policy, Fraternity/Sorority Additional Definitions Endorsement,
Beyond these restrictions on those insured, the policy
specifically excludes coverage for violations of the fraternitys
alcohol policy:
I. Special Additional Exclusion - Violations of
Fraternity Alcohol Policy
No insurance coverage afforded by this policy shall apply
to any Chapter, Colony or Undergraduate Insureds
for any claim arising out of or in any way resulting from
any Violation of Fraternity Alcohol Policy.
II. Additional Definitions
Fraternity Alcohol Policy means: The written rules,
regulations, or procedures regarding alcohol which are
established by the First Named Insured and the Chapter
or Colony at the time of loss.
Violation means: Determination by the executive board
of the First Named Insured, or legal authority that some
breaking, infraction, or breach of Fraternity Alcohol
Policy occurred.
Policy, Endorsement #E, Special Additional Exclusion, Violations
of Fraternity Alcohol Policy, JFR-FSL-080.
The National Fraternity has adopted numerous policies and
procedures regarding alcohol. The Risk Management Manual,
promulgated by the PSK Grand Chapter, states, inter alia:
1. The possession, sale, use or consumption of
ALCOHOLIC BEVERAGES, while on chapter premises, or
during a fraternity event, in any situation
sponsored or endorsed by the chapter, or in any
event an observer would associate with a
fraternity, must be in compliance with any and all
applicable laws of the state, province, county,
city and institution of higher education, and must
comply with either the BYOB or Third Party Vendor
Guidelines (BYOB is defined as both individual
members and individual guests, of legal drinking
age, bringing their own alcohol to a function).
2. No alcoholic beverages may be purchased through
chapter funds nor may the purchase of same for
members or guests be undertaken or coordinated by
any member in the name of or on behalf of the
chapter. The purchase or use of a bulk quantity or
common sources of such alcoholic beverages, i.e.
kegs or cases, is prohibited.
3. OPEN PARTIES, meaning those with unrestricted
access by non-members of the fraternity, without
specific invitation, where alcohol is present,
shall be prohibited.
4. No members, collectively or individually, shall
purchase for, serve to, or sell alcoholic beverages
to any minor (i.e., those under the legal drinking
age). . . .
11. The causing or contributing to the intoxication of
any person, and/or furnishing of alcohol to a
person or persons under the legal drinking age or
under the influence of alcohol, and/or violation of
any statute, ordinance, or regulation relating to
the sale, gift, distribution, or use of alcoholic
beverages, shall be viewed as a violation of the
Grand Chapter Risk Management Policies.
Risk Management Manual, Alcohol and Drugs Policy, Bates
The National PSK Fraternitys guidelines concerning hosting
official fraternity events specifically incorporate this alcohol
policy. Id. The Local MSUM PSK Chapters Bylaws incorporate the
policy as well. These rules explicitly prohibit underage drinking.
See Phi Omega Bylaws, Articles XVI-XVII.
B. Events in the Underlying Action
On September 22, 2005, members of the PSK Local Chapter, Phi
Omega, held a party at the residence generally known as the PSK
frat house. This property, located at 611 10th Street, Moorhead,
Minnesota, is not owned by the Local Chapter, but by a fraternity
3The Kycia Defendants summary judgment briefs suggest these
facts are in dispute. They support the suggestion with statements
of certain Individual Defendants, i.e., they did not buy beer for
the party; they did not serve alcohol to persons younger than 21
years old. Their suggestion fails, however, because the Kycia
Defendants complaint in the Underlying Action belies their briefs
denials that alcohol was not available to underage drinkers.
Indeed, their state tort claims rely entirely on the fact that beer
and hard liquor was furnished to underage drinkers, most
particularly Patrick Kycia, causing his intoxication.
members father. Rooms in the frat house are leased to fraternity
members. There were no fewer than eight PSK fraternity members
present at the party, all named as Individual Defendants in both
the Underlying Action and in this case. Alcoholic beverages were
consumed at the party. While the identity of the individuals who
served Mr. Kycia alcohol is disputed, the Court finds it
irrelevant. This is because there is no dispute that the party was
open to members and non-members alike, with alcohol given to, and
consumed by, underage drinkers.3
Patrick Kycia, a nineteen-year-old MSUM student, was neither
a member, nor was he affiliated with the fraternity. Patrick
attended the party, during which he became extremely intoxicated.
He disappeared that night, and some five days later, on September
27, 2005, his body was recovered from the Red River. Moorhead
Police investigated his death. Their investigation led to charges
against certain fraternity members for furnishing alcohol to a
Kycias family filed their state tort action in Clay County,
Minnesota, on May 6, 2006. According to their complaint, the
4A Miller-Shugart settlement agreement, a product of the
seminal case, Miller v. Shugart, 316 N.W.2d 729 (Minn. 1982),
arises where an insurer denies all coverage for an accident, and
the abandoned insured agrees with the accident victim that judgment
in a certain sum may be entered against it in return for the
accident victim releasing the insured from any personal liability
and agreeing to seek coverage from the insurer. Stan Koch & Sons
Trucking, Inc. v. Great West Casualty Co., 517 F.3d 1032, 1036 n.
4 (8th Cir. 2008).
Individual Defendants, the property owner, the PSK National
Fraternity, and the Local Chapter were liable for Kycias death by
failing to use reasonable care to protect his safety at the party.
The complaint alleged eight counts: (1) dram shop violation
against PSK and the Local Chapter; (2) dram shop violation against
the Individual Defendants; (3) dram shop vicarious liability
against PSK; (4) dram shop violation against the property owner;
(5) negligence against PSK and the Local Chapter; (6) negligence
against the property owner; (7) negligence against MSUM; and (8)
negligence against the Individual Defendants. Each claim is
premised on the fact that Patrick Kycia, under age 21, received,
and was permitted to illegally consume, alcoholic beverages at the
The claims in the Underlying Action have been resolved in one
fashion or another against most defendants. The state court
granted motions for summary judgment and dismissed the claims
against the National Fraternity, Sayre, Gulmon, and Bridley. The
claims against Ogren and Narog were dismissed by stipulation. The
Local Chapter defaulted. Sander entered into a Miller-Schugart4
agreement with the Kycia Defendants in the Underlying Action on
November 16, 2006. In doing so, Sander defaulted on the issue of
liability, and assigned the Kycia Defendants his rights to pursue
insurance indemnity on the claims. The claims against Morris and
Carney are still pending in state court.
Plaintiff commenced this declaratory judgment action on
December 7, 2006. Named defendants in the suit are the Local
Chapter, the Individual Defendants, and the Kycia Defendants.
Carney and Gulmon stipulated they were not entitled to coverage.
The claims against them were dismissed on February 27, 2007, and
April 18, 2007, respectively. This Court granted default judgment
against the Local Chapter, Morris, Narog, and Ogren on May 3, 2007,
and against Sayre and Bridley on August 2, 2007. Judgment has been
entered on all adjudicated claims. The only remaining defendants
in this action are Sander and the Kycia Defendants.
II. Analysis
Summary judgment is appropriate when the evidence, viewed in
the light most favorable to the nonmoving party, presents no
genuine issue of material fact. Fed. R. Civ. P. 56(c); Celotex
Corp. v. Catrett, 477 U.S. 317, 322-23 (1986); Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 247-52 (1986). This case rests on
interpretation of an insurance policy, which the Court decides as
a matter of law. See Iowa Kemper Ins. Co. v. Stone, 269 N.W.2d
885, 886-87 (Minn. 1978). As there is no genuine issue of material
fact and the issue is one of law, the matter is ripe for summary
A. The Kycia Defendants Standing
The Court first considers whose rights it must adjudicate.
The Kycia Defendants claim they are entitled, pursuant to the
Miller v. Shugart agreement, to whatever rights are accorded
Sander. They also claim coverage under rights afforded to the
Local Chapter, which defaulted in the Underlying Action. They
further assert rights under Morriss and Carneys coverage, whose
liability in the Underlying Action has not yet been resolved.
Plaintiff replies, stating the Kycia Defendants lack standing
to pursue coverage on behalf of any party other than Sander. The
Local Chapter, Morris, and Carney have not assigned the Kycia
Defendants any rights. Plaintiff notes the Local Chapters and
Morriss defaults; Carneys stipulation to being uninsured; the
dismissal of claims against these three defendants; and the entry
of judgment.
The Court finds the Kycia Defendants may independently pursue
coverage for the Local Chapter, Morris, and Carney. Although those
parties do not pursue coverage on their own behalf, a case or
controversy certainly exists between plaintiff and the Kycia
Defendants as to whether those parties were insured. See Federal
Kemper Ins. Co. v. Rauscher, 807 F.2d 345, 354-55 (3d Cir. 1986).
In Federal Kemper, a case procedurally similar to this, the Third
Circuit found:
the injured party has an independent, and not a
derivative right, to be heard . . . . In terms of
fairness, the injured party should be able to present its
case upon the ultimate issues, even if the insured does
not choose to participate. Id.
Similarly, in addressing a coverage dispute where the insured had
defaulted on the issue of coverage, the Seventh Circuit stated:
The Supreme Court has held that in a declaratory
judgment action an actual controversy exists between an
injured third party - not a party to the contract of
insurance - and the plaintiff insurer. Maryland
Casualty co. v. Pacific Coal & Oil Co., 312 U.S. 270
(1941). It would be anomalous to hold here that an
actual controversy exists between [the injured party]
and [the insurer] and yet deny [the injured party] the
right to participate in the controversy. . . . Since
[the injured party] was a proper party, the default of
[the two insureds] may not preclude [the injured
partys] right in this respect.
Hawkeye-Security Ins. Co. v. Shulte, 302 F.2d 174, 177 (7th Cir.
1962). The Eighth Circuit expressly adopted the Seventh Circuits
approach when deciding Automobile Underwriters Corp. v. Graves,
489 F.2d 625, 627-28 (8th Cir. 1973) (finding injured party has
standing to appeal adverse judgment).
Although the Local Chapter, Morris, and Carney have opted
against pursuing coverage on their own behalf, the Kycia
Defendants hold a real interest in determining whether those
persons/entities are covered by the policy. As the injured
parties, they should not be precluded from litigating those issues
merely because putative insureds chose not to do so. For these
reasons, and for purposes of this motion, the Court finds the
Kycia Defendants have standing to pursue coverage not only on
behalf of Sander, but also the Local Chapter, Morris, and Carney.
B. Who is an Insured?
A court interprets an insurance contract as a matter of law.
Iowa Kemper, 269 N.W.2d at 886-87. Clear and unambiguous terms
must be enforced as written. Smith v. St. Paul Marine Ins. Co.,
353 N.W.2d 130, 132 (Minn. 1984). The policy is construed as a
whole, and a court may not read an ambiguity into a policys plain
language. Hubred v. Control Data Corp., 442 N.W.2d 308, 310-11
(Minn. 1989).
The insured bears the initial burden of showing a claim is
covered under an insurance policy. Dakhue Landfill, Inc. v.
Employers Ins. of Wausau, 508 N.W.2d 798, 803 (Minn. Ct. App.
1993). This means the Kycia Defendants have the burden of showing
coverage. If policy coverage is established, the insurer bears
the burden of proving the claim is subject to an exclusion. Id.
The Court finds the PSK Policys terms are explicit: local
chapter and individual fraternity members coverage is limited to
particular circumstances when three criteria are met. The entity
or person is insured:
[1] only while acting in accordance with the Named
Insured policies and procedures and their own policies
and procedures; and [2] only while acting within the
scope of their duties; and [3] only with respect to their
liability for activities performed by them on behalf of
the [National or Local Fraternity].
Policy, Who is Insured Endorsement, JFR-FSL-064. Finding no
ambiguity in this language, the Court interprets the policy
according to its plain language.
Plaintiff contends the Local Chapter and Individual
Defendants do not qualify as insureds for the events leading to
Kycias death because they were not acting in accordance with the
National Fraternitys alcohol policy, they were not acting within
the scope of their duties, and they were not acting on behalf of
the National Fraternity or the Local Chapter. The Court agrees.
The Underlying Complaints theory of liability is premised on
the fraternity members acts in furnishing alcohol to Patrick
Kycia and failing to take reasonable steps to protect his safety
once he became intoxicated. The Kycia Defendants now want to turn
the Underlying Complaint on its head by arguing their negligence
claims of failure to use reasonable care are separate and distinct
from their alcohol-related claims and, hence, do not rely upon
acts that would violate the fraternity alcohol policy.
The Court finds the Kycia Defendants have failed to meet
their burden of establishing that either the Local Chapter or the
Individual Defendants qualify as insureds under the policy. Even
if the negligence claims were viewed as allegations separate and
distinct from those involving alcohol - which is almost impossible
to do - the Court cannot deceive itself to find the Individual
Defendants were acting in a capacity covered by the policy.
Even if the Court could imagine that the party-givers were
acting on behalf of the fraternity, no reasonable jury could
conclude this party was in accord with either the Local Chapters
or the National Chapters alcohol policies. Alcohol was
absolutely served to minors and intoxicated persons. Serving
alcohol to minors is illegal under state laws, and the party was
open to non-members. No reasonable jury could possibly find the
National Fraternitys Risk Management Manual authorized this party
or the behavior engaged in by the Individual Defendants. The
Policy limits coverage to members acting in accord with fraternity
policies and procedures; therefore, the Individual Defendants do
not qualify as Insureds under the Policy.
Plaintiffs have proffered no evidence from which a jury could
find any of the Individual Defendants acted toward Patrick Kycia
within the scope of their duties as fraternity members. No
reasonable jury could find the Individual Defendants presence at
the party fell within the scope of their duties, in light of the
partys flagrant violation of the fraternitys alcohol policy.
The Kycia Defendants argue the party took place during a season of
fraternity recruiting, and from this fact a jury could conclude
the Individual Defendants were acting within the scope of their
duties in an attempt to recruit fraternity members. The Court
cannot deny that underage drinking may go on at fraternity
recruiting parties. This fact notwithstanding, the Kycia
Defendants argument fails to establish insurance coverage.
It fails because none of the Individual Defendants were
acting in accord with the Local Chapters or the National
Fraternitys policies in the actions and/or inactions they took on
the night of the party. Each entity has strict rules and policies
against serving alcohol to minors - and that is what occurred
during this event. By particpating in this event, the Individual
Defendants placed themselves outside of the definition of an
Insured under the plain language of the Policy.
The same is true of the Local Chapter. A Local Chapter is a
fraternal organization which can only act through its members.
Here, where individual members participated in a non-fraternity
event in a fashion not covered by the Policy, there is no basis to
find the Local Chapter falls within the definition of an Insured
for any liability it may have toward the Kycia Defendants.
Even were the Court to find evidence placing the Local
Chapter or Individual Defendants within the Policys definition of
an Insured, the alcohol exclusion policy clearly exempts them from
coverage. The insurance policy excludes coverage for any claim
arising out of or in any way resulting from any violation of
Fraternity Alcohol Policy, defined in the policy as the
written rules, regulations, or procedures regarding alcohol.
Policy, Endorsement #E, JFR-FSL-80. As above, the National
Fraternitys Risk Management Manual clearly and explicitly
prohibits parties such as the one at issue here. The Kycia
Defendants negligence claims - and the tragic loss of Patrick
Kycia - have arisen from a blatant and horrific violation of this
policy. Accordingly, these claims, and any others that arose from
the party, are excluded from coverage.
III. Conclusion
For the reasons stated above, the Court finds the Local
Chapter and Individual Defendants are not covered by the policy.
Accordingly, IT IS ORDERED that:
1. Plaintiffs motion for summary judgment [Docket No. 89]
is granted.
2. The Kycia Defendants motion for summary judgment [Docket
No. 84] is denied.
3. Plaintiff is not required under the Policy to defend or
indemnify the Phi Omega Chapter of Phi Sigma Kappa at Minnesota
State University Moorhead, Marcus O. Carney, Jason J. Morris, or
James J. Sander, for claims made against them by the Kycia
Dated: August 19, 2008
United States District Judge


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