Court Finds No Duty to Defend Insured Involved
in BPA Consumer "No-Injury" Class Actions

Written By Attorneys: Joseph F. Bermudez, Jason D. Melichar and Suzanne M. Meintzer

Over the last few years, we have seen a significant and steady increase in the filing of product liability lawsuits. Consumer "No-Injury" Class Actions are considered to be a primary cause for this increase. Consumer "No-Injury" Class Actions are attractive to the plaintiff bar as they can be based on the mere violation of a state consumer protection statute. Insureds are concerned with the increase in the number of suits they are facing and whether they are covered under their liability policies. A recent decision, Medmarc Cas. Ins. Co. v. Avent America, Inc., No. 08 C 5832, Document No. 94 (N.D. Ill. Aug. 31, 2009), provides guidance as to the coverage issues involved with such product claims.

In Avent, Judge Harry D. Leinenweber of the United States District Court for the Northern District of Illinois rejected an insured's claim for defense against Consumer "No-Injury" Class Action lawsuits, finding that the underlying actions did not contain any allegations of actual bodily injury.

Avent America, Inc. ("Avent") manufactured baby bottles that contained the alleged toxic chemical Bisphenol A ("BPA"). The class actions each claimed that the class members suffered economic loss because of Avent's use of BPA without advising the class of BPA's potential harmful effects. The plaintiffs sought injunctive relief against misleading and deceptive practices, damages for breach of contract, restitution, disgorgement of profits, and actual and punitive damages. Although the actions contained negligence claims, no allegations were advanced that the plaintiffs or their children had sustained any type of actual bodily injury, nor did they seek damages for personal injury. As such, Avent's insurer, Medmarc Casualty Insurance Company ("Medmarc"), filed an action seeking a declaratory judgment that it had no duty to defend Avent.

In arguing that its duty to defend was not triggered, Medmarc focused on the lack of bodily injury allegations as well as its claim that the class actions were not brought by the users of the product but, rather, by the purchasers. As such, Medmarc argued that the claimed damages constituted, at most, economic harm. In support, Medmarc cited decisions denying coverage for pure economic losses even where, in one instance, such losses resulted from the bodily injury of the insured's employees. Avent countered that other courts had found the term "bodily injury" broad enough to encompass emotional harm even in the absence of physical injury. Avent also noted that coverage could be had for medical monitoring expenses due to exposure to toxins such as lead.

In rejecting Avent's arguments, the Court distinguished the cases it relied upon because they each involved a claim for a specific personal injury that resulted from an alleged occurrence. Because no similar claims were advanced in the class action suits, none of which prayed for reimbursement of medical monitoring expenses, the Court concluded that Medmarc had no duty to defend under its policies. As an aside, the Court noted Avent's argument that Medmarc was providing it a defense for its use of BPA in a separate case. In that action, however, the plaintiff claimed to have sustained injury from exposure to BPA, which the Court indicated "would seem to exonerate Medmarc from a charge that it refuses to provide any defense as a result of BPA exposure" even where an injury is alleged.

In the final analysis, the Court's opinion in Avent illustrates the importance of thoroughly assessing the specific allegations of a complaint in conjunction with the policy language in order to accurately determine whether a defense obligation exists. It is simply not enough for an insured to point to a negligence claim to trigger an insurer's defense obligation. We expect the increase in the filing of product-related consumer class actions to continue for the foreseeable future. We also expect that plaintiffs will continue to attempt to allege medical monitoring and other chronic injury type claims in the hope of triggering any available insurance. Insurers must carefully analyze underlying complaints in order to determine if the allegations properly fall within the scope of coverage or are excluded. We are always happy to further discuss these issues to ensure your interests are fully protected.

For further analysis of Crisis Management coverage issues involving, international and domestic food contamination/product recalls; trade disruption; supply chain management; brand risk; political risk; terrorism; kidnap & ransom; cyber attack; and other emerging issues such as climate change, nanotechnology or pandemics, please contact Joe Bermudez, Jason Melichar or Suzanne Meintzer of Nelson Levine de Luca & Horst. NLdH is a nationally recognized leader in representing the insurance industry in all coverage areas.