In the underlying state court litigation, plaintiff, Henry Kent, filed an action against She-Kev, Inc. and Kev-She Realty Associates and Ltd. Partnership d/b/a Smiles II Restaurant (collectively “She-Kev”) in the Superior Court of New Jersey, Law Division, Morris County, in late 2009. On July 2, 2007, on the premises of Smiles II Restaurant, Kent was stabbed in the sternum with a knife by Joseph Green in the parking lot of the restaurant. The Complaint alleged negligent security, gross negligence, and negligent service of alcohol which resulted in plaintiff’s injuries. Kent alleged that the incident would not have occurred but for the negligence of Smiles II Restaurant in their failure to provide adequate security and a safe premises.

She-Kev subsequently gave notice of the claim to its Liquor Liability insurance carrier, Praetorian Specialty Insurance Co., (hereinafter “Praetorian”), which was not a party to the state court litigation. On April 14, 2010, Praetorian filed a Declaratory Judgment action against She-Kev, Henry Kent, and Joseph Green in District Court seeking a declaration that Praetorian had no duty to defend and/or indemnify She-Kev under the Dram Shop policy for the underlying suit.

Praetorian urged the Court to analyze the “assault and battery” exclusion contained in the Liquor Liability policy at issue to conclude that Praetorian owed no duty to defend Smiles II Restaurant for Kent’s State Court claims. Although Kent’s claims sounded in negligence, including dram shop liability, Praetorian urged the District Court to construe such claims as falling within the scope of the “assault and battery exclusion” of the Liquor Liability policy at issue based upon the theory that the negligence alleged resulted from an assault and battery.

The District Court declined to retain jurisdiction over Praetorian’s declaratory judgment action finding that unsettled issues of law raised must be addressed by the State courts. Specifically, there is no reported New Jersey opinion which directly addresses the application of an “assault and battery” exclusion, endorsed to a Liquor Liability policy, to a dram shop claim.” The Third Circuit has cautioned that “District Courts… do not establish State law.” State Auto Ins. Companies v. Summy, 234 F.3d 131, 135 (3d Cir. 2000). Thus, “where the applicable state law is uncertain or undetermined, District Courts should be particularly reluctant to entertain Declaratory Judgment actions.” Id. at 135.

The District Court also noted that the Third Circuit has made clear that “the desire of insurance companies and their insureds to receive declarations in Federal Court on matters of purely State law has no special call on the Federal forum.” State Auto Ins. Companies v. Summy, 234 F.3d 131, 136 (3d Cir. 2000). As such, the District Court exercised its discretion to decline jurisdiction over Praetorian’s Declaratory Judgment complaint, noting that considerations of practicality and wise judicial administration require that the unsettled applicability of an “Assault and Battery” exclusion to a dram shop claim must instead be determined by the State Courts.