Court Dismisses Insurer’s Suit Against Four Loko® Company

A federal court in Illinois has granted the motion to dismiss filed by Phusion Projects, Inc., which sells Four Loko®, a caffeinated alcoholic beverage, in a case brought by one of the company’s insurers seeking a declaration that it owed no duty to defend or indemnify the beverage maker in third-party lawsuits claiming injury, death or economic harm. Selective Ins. Co. of S.C. v. Phusion Projects, Inc., No. 11-3378 (N.D. Ill., decided November 15, 2011). According to the court, the case presented no case or controversy because Phusion has withdrawn its tender of defense and request for indemnification from this insurer.

Because Phusion refused to withdraw its request “with prejudice and for all purposes” and continued to provide the insurer with notice of new claims “in compliance with the policy notice provision,” the insurer argued that the beverage company was reserving its right to reassert a demand for coverage in the future thus rendering the insurer’s claims appropriate for immediate resolution. The court disagreed, stating, “neither party appears to have any significant interest in having plaintiff’s hypothetical future claim resolved now . . . Illinois law supports defendants’ argument that where an insured has ‘deactivated’ an insurer with respect to a particular claim, that insurer is ‘relieved of its obligation to the insured with regard to that claim,’ and neither the insured’s ongoing notification to the insurer of potential new claims, nor the insured’s indication that it is placing plaintiff on ‘standby’ triggers a renewed duty to defend.”