Court minimizes “energy” aspects of the product finding no duty to defend or indemnify based on liquor liability exclusion.

The Federal Seventh Circuit Appellate Court, applying Illinois law, found that a liquor liability exclusion applied to bar defense and indemnity coverage to Phusion, the producer of the Four Loko alcohol energy drink, for various suits alleging injury and death. The drink at issue contained alcohol, but also contained stimulants, including caffeine. The policyholder argued that the stimulants in the drinks were also allegedly causative agents of the injury, and thus the liquor liability exclusion did not preclude coverage because the allegations were broader than the exclusion. The court rejected this argument saying that the choice to add stimulants is not an additional wrongdoing that amounts to a separate allegation outside of the liquor liability exclusion.  The court reasoned that the allegations of intoxication in the claims are not capable of being severed from Phusion’s furnishing of alcohol. The court concluded by stating that “if Phusion wanted insurance coverage for incidents that occurred after someone imbibed its alcoholic concoctions … Phusion could have requested additional liquor liability coverage and paid additional premiums for it. They did not.” Netherlands Ins. Co. v. Phusion Projects Inc., No. 12-1355 (7th Cir. Dec. 16, 2013).

This case appears to have applied an arguably narrow reading of the plain meaning and ambiguity rule, which provides that if there are more than two reasonable interpretations of the policy language the court should resolve them in favor of the policyholder and the carrier should at least defend.  The court did not ignore the rule, but instead found that the plain meaning of the liquor liability exclusion was clear.  The court reasoned that the energy components of the drink were unrelated to the resultant harm, despite arguments from the policyholder that the very nature of the claims were that “but for” the inclusion of the energy ingredients, the harm wouldn’t have happened because the stimulants allowed the claimants to drink more than they otherwise would have.