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Netherlands Insurance Co. and Indiana Insurance Company v. Phusion Projects

January 17, 2012

NETHERLANDS INSURANCE CO. AND INDIANA INSURANCE COMPANY, PLAINTIFFS,
v.
PHUSION PROJECTS, INC. AND PHUSION PROJECTS, LLC, DEFENDANTS.



The opinion of the court was delivered by: Matthew F. Kennelly, District Judge:

MEMORANDUM OPINION AND ORDER

Netherlands Insurance Co. and Indiana Insurance Company have sued Phusion Projects, Inc. and Phusion Projects, LLC (collectively Phusion). Plaintiffs seek a declaratory judgment that they have no duty to defend or indemnify Phusion in five lawsuits. Phusion has brought a counterclaim seeking a declaratory judgment that plaintiffs do have a duty to defend it. The Court has jurisdiction based on diversity of citizenship. Both plaintiffs and defendants have moved for summary judgment. For the reasons stated below, the Court grants each motion in part and denies each in part.

Background

Phusion produces and sells Four Loko, an alcoholic beverage that contains large amounts of caffeine as well as other stimulants. In five state-court suits, individuals have sued Phusion claiming that they suffered injuries after drinking Four Loko themselves or were injured by someone else who had drunk Four Loko. The suits allege that Four Loko is dangerous because it combines high amounts of alcohol with high amounts of stimulants. The state-court plaintiffs allege that the combination of alcohol and stimulants allows drinkers to consume more alcohol without passing out, causes drinkers to behave more erratically when intoxicated, and leads to other negative health effects.

Netherlands and Indiana insure Phusion. Netherlands issued Phusion a commercial general liability (CGL) insurance policy and Indiana issued an umbrella insurance policy. Both insurance policies provide coverage for bodily injury and property damage caused by Phusion's products. The policies had exclusions that stated:

This insurance does not apply to: . . .

c. Liquor Liability "Bodily injury" or "property damage" for which any insured may be held liable by reason of:

(1) Causing or contributing to the intoxication of any person;

(2) The furnishing of alcoholic beverages to a person under the legal drinking age or under the influence of alcohol; or

(3) Any statute, ordinance or regulation relating to the sale, gift, distribution or use of alcoholic beverages.

This exclusion applies only if you are in the business of manufacturing, distributing, selling, serving or furnishing alcoholic beverages.

Compl., Ex. F-3 at 8 & Ex. G at 5--6.

Discussion

On a motion for summary judgment, the Court "view[s] the record in the light most favorable to the non-moving party and draw[s] all reasonable inferences in that party's favor." Trinity Homes LLC v. Ohio Cas. Ins. Co., 629 F.3d 653, 656 (7th Cir. 2010). Summary judgment is appropriate "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a).

The parties do not dispute that Illinois law applies to this case. In Illinois, when "the issue is whether the insurer has a duty to defend, a court ordinarily looks first to the allegations in the underlying complaint and compares those allegations to the relevant provisions of the insurance policy." Pekin Ins. Co. v. Wilson, 237 Ill. 2d 446, 455, 930 N.E.2d 1011, 1016--17 (2010). "If the facts alleged in the underlying complaint fall within, or potentially within, the policy's coverage, the insurer's duty to defend arises." Id. Plaintiffs argue that they have no duty to defend Phusion in the lawsuits because the liquor liability exclusion unambiguously includes all claims in the underlying suits.Phusion argues in ...


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