Insurer won’t have to cover Chicago drink manufacturer

On behalf of Mike Clancy

Caffeine is known to make individuals nervous, restless and increase their heart rate, amongst other side effects. Alcohol impairs an individual’s vision, decision-making ability and reaction time, and of course, it has its own dangerous health consequences when consumed in larger quantities.

Knowing the side effects of both of these substances, it might not be a huge surprise to learn that a drink manufacturer that combined these two was later hit with some lawsuits claiming that the product was unreasonably dangerous. Yes, we are talking about the caffeinated drink called Four Loko, manufactured by the Chicago-based company Phusion Projects.

The drink caught the attention of safety experts, one of them being the U.S. Food and Drug Administration, in 2010. Why? Hospitals reported an increasing number of cases involving students that were rushed to the hospital as a result of the consumption of this drink. These cases even prompted the FDA to ban all caffeinated alcoholic beverages from sale in the United States.

When the consumption of this drink was found to have occurred just prior to someone causing an accident involving serious injuries, lawsuits were filed. The company then turned to its insurance carrier for coverage. That coverage was denied on the basis that the specific policies purchased by the company excluded instances in which bodily injury or property damage resulted from, in whole or in part, consumption of this drink.

When the company disputed this denial, the case was taken up by the U.S. Seventh Circuit Court of Appeals. The court recently sided with the insurer on its claim. The court then went further to say that the company was essentially underinsured, having the option to purchase a policy that would have covered these cases. Instead, the company opted for a less expensive and more limited coverage policy.

Source: The Cook County Record, “7th Circuit: insurers not liable for defense in Four Loko lawsuits,” Andrew Thomason, Dec. 18, 2013

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Insurer won’t have to cover Chicago drink manufacturer