Medmarc Casualty Insurance v. Avent America, Inc.
612 F.3d 607, 2010 WL 2780190, 2010 U.S. App. LEXIS 14488 (2010)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
Under a commercial general liability policy covering damages 'because of bodily injury,' an insurer has no duty to defend where the underlying lawsuits allege purely economic losses stemming from a product's potential for harm, without any allegation of actual bodily injury sustained by any person.
Facts:
- Avent America, Inc. ('Avent') manufactured and sold baby products, such as bottles and sippy cups, that contained the chemical Bisphenol-A (BPA).
- A large body of scientific research indicated that BPA could leach from products and was potentially harmful to humans, especially children.
- Avent marketed its products as safe for infants and toddlers without disclosing the presence of BPA or its associated health risks.
- Parents purchased these products for their children based on the belief that they were safe.
- Upon learning of the potential dangers associated with BPA, the parents stopped using the Avent products.
- The parents alleged they would not have purchased the products had they known the true facts and thus suffered an economic injury because they did not receive the full benefit of their purchase.
- Crucially, none of the complaints in the underlying lawsuits alleged that any child or parent had suffered any actual bodily injury, sickness, or disease as a result of using the products.
Procedural Posture:
- Numerous class action lawsuits were filed against Avent by parents who purchased its BPA-containing products.
- These lawsuits were consolidated into a multidistrict litigation (MDL) in the U.S. District Court for the Western District of Missouri.
- Avent tendered the defense of these suits to its insurers, Medmarc Casualty, Pennsylvania General, and State Farm.
- The insurers denied coverage, and Medmarc filed a declaratory judgment action in federal district court seeking a declaration that it had no duty to defend.
- Avent counterclaimed against Medmarc and filed a third-party complaint against Pennsylvania General and State Farm, seeking a declaration that they had a duty to defend and indemnify.
- The insurance companies moved for summary judgment or judgment on the pleadings, arguing the underlying suits did not allege 'bodily injury' covered by the policies.
- The district court granted the insurers' motions, finding they had no duty to defend.
- Avent, as the appellant, appealed the district court's decision to the U.S. Court of Appeals for the Seventh Circuit.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Does an insurer have a duty to defend its insured under a policy covering damages 'because of bodily injury' when the underlying lawsuits allege only economic loss from purchasing a product with a potential for harm, but do not allege any actual bodily injury to any plaintiff?
Opinions:
Majority - Flaum, Circuit Judge.
No. An insurer does not have a duty to defend its insured under a policy covering damages 'because of bodily injury' when the underlying lawsuits allege purely economic losses and fail to allege that any actual bodily injury has occurred. The policy language requires that the damages sought must flow from an actual bodily injury. Here, the underlying complaints do not allege that anyone was physically harmed; instead, they seek economic damages for the loss of the products' value because of a risk of future harm. The plaintiffs made a strategic decision to omit claims of physical harm to facilitate class certification, which is not a mere 'drafting whim' the court should ignore. While the phrase 'because of bodily injury' is broader than 'for bodily injury,' it still requires a predicate bodily injury, which is absent in this case. The allegations about BPA's health risks serve only as background to explain the economic loss claim, similar to the reasoning in Health Care Indus. Liab. Ins. Program v. Momence Meadows Nursing Center, where allegations of patient abuse were incidental to a claim for fraudulent billing. Therefore, the insurers have no duty to defend.
Analysis:
This case clarifies the boundary of an insurer's duty to defend under standard 'because of bodily injury' policy language in Illinois. The court establishes that the mere potential for physical harm, which leads to a product being deemed unusable and results in purely economic loss, is insufficient to trigger coverage. This decision distinguishes between consumer fraud or breach of warranty claims (economic injury) and true product liability claims (physical injury), providing insurers a clearer line for denying coverage in 'no-injury' class action lawsuits. The ruling reinforces that the duty to defend hinges on the factual allegations of actual harm in the complaint as it is written, not on speculative future amendments or potential un-pled injuries.
