FILED

United States Court of Appeals

Tenth Circuit

December 8, 2011

Elisabeth A. Shumaker

Clerk of Court

UNITED STATES COURT OF APPEALS

FOR THE TENTH CIRCUIT

MOUNT VERNON FIRE

INSURANCE COMPANY,

Plaintiff-Appellee,

v.

OKMULGEE INN VENTURE, LLC,

Defendant-Appellant,

and

FRANCISCO OLMOS; LA

MARGARITA MEXICAN

RESTAURANT; STEVE EARL

PERRY, JR.; MICHAEL WILSON;

RANDY JAMES,

Defendants.

No. 11-7036

(D.C. No. 6:10-CV-00033-FHS)

(E.D. Okla.)

ORDER AND JUDGMENT*

Before KELLY, Circuit Judge, PORFILIO, Senior Circuit Judge, and

MATHESON, Circuit Judge.

* After examining the briefs and appellate record, this panel has determined

unanimously to grant the parties’ request for a decision on the briefs without oral

argument. See Fed. R. App. P. 34(f); 10th Cir. R. 34.1(G). The case is therefore

ordered submitted without oral argument. This order and judgment is not binding

precedent, except under the doctrines of law of the case, res judicata, and

collateral estoppel. It may be cited, however, for its persuasive value consistent

with Fed. R. App. P. 32.1 and 10th Cir. R. 32.1. 
In Oklahoma, insurers are required to defend their insureds whenever facts

give rise to the potential of liability under the policy. In this case, the district

court found the insurer owed no duty of defense or indemnification because the

precise facts alleged against the insured did not demonstrate there was coverage

under the policy. We agree the facts fail to conclusively demonstrate coverage,

but we think there is still a potential for coverage as permitted by Oklahoma law. 

We therefore reverse and remand for entry of judgment in favor of the insured.

I

Okmulgee Inn Venture, LLC (“Okmulgee”) leased space to a nightclub-bar

and was a named insured on a liquor liability insurance policy. Under the policy

terms, Okmulgee was insured against injuries caused by “the selling, serving or

furnishing of any alcoholic beverage.” Aplt. App. Vol. 1 at 75. Also under the

policy, Okmulgee’s insurer, Mount Vernon Fire Insurance Company

(“Mt. Vernon”), assumed a duty to defend Okmulgee against suits seeking

damages for injuries covered by the policy. The relevant policy language states:

We will pay those sums that the insured becomes legally obligated to

pay as damages because of “injury” to which this insurance applies if

liability for such “injury” is imposed on the insured by reason of the

selling, serving or furnishing of any alcoholic beverage. We will

have the right and duty to defend the insured against any “suit”

seeking those damages. However, we will have no duty to defend the

insured against any “suit” seeking damages for “injury” to which

this insurance does not apply.

Id. (emphasis added). 

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In 2006, three bar patrons sustained gunshot wounds during a fight at the

nightclub and sued Okmulgee, alleging, among other things, that Okmulgee failed

to ensure the safety of the bar’s patrons, properly train the bar’s staff, or

investigate the bar’s operator. The only specific allegations pertaining to alcohol

were that two of the three victims were under-age but were admitted to the bar

and served alcohol. Mt. Vernon refused to defend Okmulgee in these suits. 

Mt. Vernon asserted there was no coverage under the policy, and thus no duty to

defend or indemnify, because the allegations did not indicate the injuries were

caused by the selling, serving, or furnishing of alcoholic beverages. Mt. Vernon

then initiated this declaratory judgment action to determine its obligations.

On cross motions for summary judgment, the district court ruled in favor of

Mt. Vernon. The court recognized that Oklahoma law requires an insurer to

defend an insured whenever facts give rise to the potential of liability under the

policy. But the court determined there was no potential of liability because there

were no specific allegations in the victims’ complaints (or other evidence)

indicating that alcohol caused the injuries. As a result, the court concluded that

Mt. Vernon owed Okmulgee no duty of defense or indemnification. 

II

We review the grant of summary judgment de novo, employing the same

legal standard as the district court. Apartment Inv. & Mgmt. Co. v. Nutmeg

Ins. Co., 593 F.3d 1188, 1192 (10th Cir. 2010). The district court’s interpretation

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of Oklahoma law, which governs this diversity action, is reviewed de novo. See

Mincin v. Vail Holdings, Inc., 308 F.3d 1105, 1108-09 (10th Cir. 2002). Our

application of Oklahoma law requires us to interpret clear and unambiguous

insurance contracts so “as to give effect to the mutual intention of the parties, as

it existed at the time of contracting.” Mansur v. PFL Life Ins. Co., 589 F.3d

1315, 1320 (10th Cir. 2009) (internal quotation marks omitted). 

Okmulgee insists Mt. Vernon owes it a duty to defend because the facts

show that coverage is provided by the policy. Specifically, Okmulgee points out

that the victims were served alcohol, witnesses referred to beer bottles being used

in the bar fight just before the shooting, and a police report from a prior incident

revealed that the shooter previously had been arrested at the same bar for public

intoxication.1

 Mt. Vernon responds, however, that the victims merely allege they

were served alcohol, not the shooter, and there are no allegations that the shooter

was drunk or that alcohol precipitated the shooting. Under these circumstances,

Mt. Vernon contends, there are no indications that alcohol caused the injuries.

In Oklahoma, “[a]n insurer has a duty to defend an insured whenever it

ascertains the presence of facts that give rise to the potential of liability under the

policy.” First Bank of Turley v. Fid. & Deposit Ins. Co. of Md., 928 P.2d 298,

303 (Okla. 1996) (footnote omitted). “The phrase ‘potentially covered’ means

1 Mt. Vernon does not contend it was unaware of this report when it denied

Okmulgee’s request for defense.

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that the insurer’s duty to defend its insured arises whenever the allegations in a

complaint state a cause of action that gives rise to the possibility of a recovery

under the policy; there need not be a probability of recovery.” Id. n.14 (internal

quotation marks omitted); accord Am. Motorists Ins. Co. v. Gen. Host Corp.,

946 F.2d 1489, 1490 (10th Cir. 1991) (“So long as the insured can show a nonfrivolous possibility that the claim against it may fall within the coverage of the

insurance contract, the insurer has a duty to defend the insured.”) (applying

Kansas law). Moreover, the analysis is not restricted to the four-corners of the

complaint; rather, an “insurer’s defense duty is determined on the basis of

information gleaned from the petition (and other pleadings), from the insured and

from other sources available to the insurer at the time the defense is demanded.” 

First Bank of Turley, 928 P.2d at 303-04 (emphasis omitted) (footnote omitted). 

The focus is “upon the facts rather than upon the complaint’s allegations, which

may or may not control the ultimate determination of liability.” Id. at 303 n.13

(emphasis omitted).

The parties dispute whether the facts demonstrate that alcohol caused the

injuries, but the issue is whether the facts establish a potential for coverage, that

is, whether the circumstances alleged give rise to the possibility that the injuries

were suffered by reason of the selling, serving, or furnishing of alcoholic

beverages. And on this score, we have little difficulty concluding that they do. 

The victims entered the bar and were served alcohol; a bar-fight ensued and

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witnesses recalled beer bottles shattering; then gunshots were fired by a shooter

who had been previously arrested at the same bar for being drunk in public. 

These known and undisputed facts establish the possibility that alcohol

contributed to the injuries. We do not mean to suggest, of course, that the

potential for coverage exists because “later-revealed facts” may show coverage: 

“‘the correctness of an insurer’s decision to [defend or not] cannot be determined

by “later-revealed facts” of which the insurer ha[s] no knowledge or notice,’” id.

at 304 n.19 (quoting Great Am. Ins. Co. v. McKemie, 259 S.E.2d 39, 40

(Ga. 1979)); see also Gray v. Holman, 909 P.2d 776, 780 (Okla. 1995) (holding

that an insurer’s liability for failure to defend is “measured by the facts then

known and knowable to it”). But the known and undisputed facts in this case,

standing alone, establish a credible possibility that the injuries sustained were

caused by the selling, serving or furnishing of alcoholic beverages.

The district court arrived at a different conclusion because the victims’

complaints did not specifically allege that alcohol caused the injuries, and the

court declined to make that assumption based on the circumstances. We think the

court’s analysis was too restrictive. “The duty to defend cannot be limited by the

precise language of the pleadings. The insurer has a duty to look behind the third

party’s allegations to analyze whether coverage is possible.” First Bank of

Turley, 928 P.2d at 303 n.15. Given the nature of the facts gleaned from the

underlying complaints and other materials, we conclude there is a possibility of

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coverage. Consequently, Mt. Vernon is obligated to defend its insured, and

Okmulgee is entitled to summary judgment on the duty-of-defense issue.

Whether Mt. Vernon owes a duty of indemnification, however, is another

matter. “The duty to defend is separate from, and broader than, the duty to

indemnify . . . .” Id. at 303. The duty to indemnify relates to liability actually

imposed on the insured for claims falling within the scope of coverage. E.g.,

United Fire & Cas. Co. v. Boulder Plaza Residential, LLC, 633 F.3d 951, 956-57

(10th Cir. 2011) (discussing Colorado law). Because the victims have yet to

establish Okmulgee’s liability for any claims, the question of Mt. Vernon’s duty

of indemnification is not ripe for adjudication. See Culp v. Nw. Pac. Indem. Co.,

365 F.2d 474, 478 (10th Cir. 1966); United Nat’l Ins. Co. v. Dunbar & Sullivan

Dredging Co., 953 F.2d 334, 338 (7th Cir. 1992). Nevertheless, we point out that

if Okmulgee is found to be liable for any claims, Mt. Vernon’s duty of

indemnification will extend only to those claims falling within the scope of the

policy.

III

The judgment of the district court is REVERSED, and this case is

REMANDED with instructions to enter summary judgment in favor of Okmulgee

on the issue of the duty to defend.

Entered for the Court

Paul J. Kelly, Jr.

Circuit Judge

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