Insurers Must Defend Four Loko Maker in One of Five Lawsuits

A federal court in Illinois has determined that insurers providing coverage to Phusion Projects, Inc., which makes Four Loko, an alcoholic beverage with large amounts of caffeine and other stimulants, do not have a duty to defend the company in lawsuits alleging injury from intoxication. Netherlands Ins. Co. v. Phusion Projects, Inc., No. 11-1253 (N.D. Ill., decided January 17, 2012). The insurers filed a declaratory judgment action against Phusion claiming that they had no duty to defend or indemnify it in five lawsuits because of an unambiguous exclusion from coverage in the applicable insurance policies. Phusion brought a counterclaim, arguing that they did have a duty to defend it.

According to the court, the exclusion applies to any case alleging injury
arising from intoxication. Because four of the five cases filed against Phusion
involve injury attributable to intoxication, the court found that the insurers
have no duty to defend the beverage maker in those suits. One of the cases,
however, involved a claim that plaintiff Michael Mustica experienced heart
problems the day after drinking 2.5 cans of Four Loko and has been under
the care of a cardiologist since then. As to this suit, the court stated, “Unlike
the other lawsuits, Mustica does not allege an injury caused by intoxication.
His claim is that he consumed a dangerous beverage and as a consequence
suffered serious health effects.” While the court ruled that the insurers must
defend this claim, it did not determine whether they must indemnify Phusion
because liability has not yet been established.