Medmarc Casualty Insurance Company v. Avent America, Inc.
612 F.3d 607 (7th Cir. 2010)Words & Phrases
Definitions: Bodily InjuryTrial Judge
Harry D. LeinenweberAppellate Judge
Justice FlaumHolding
Insurers did not have a duty to defend manufacturer of baby bottles containing a toxic chemical under policy provision providing coverage for bodily injury where the allegation were only that consumers suffered economic damages.Fact Summary
Parents who had purchased baby bottles from Avent brought a class action lawsuit, alleging that Avent misrepresented the quality of its products by failing to warn or otherwise disclose that they contained Bisphenol-A (“BPA”). The parents alleged that when they learned of the presence of BPA, they stopped using the baby bottles, and therefore, did not receive the full benefit of their purchases.
Avent tendered the lawsuit to its insurers, but coverage was denied and declaratory judgment actions ensued. On motions for summary judgment and judgment on the pleadings, the district court held that the insurers had no duty to defend because the insurance policies covered “bodily injury” and the plaintiffs in the underlying lawsuit sought only economic damages.
In affirming the district court’s ruling, the Seventh Circuit held that the underlying lawsuit simply did not allege any bodily injury or any increased risk of bodily injury for which the underlying plaintiffs should be compensated. Avent attempted to circumvent this conclusion by arguing that plaintiffs had intentionally omitted claims for bodily injury “to make it easier to be certified as a class,” and that the duty to defend should not be at the mercy of the “drafting whims” of the plaintiffs’ attorneys. The court rejected the argument, holding that the decision to allege only economic damages was not a drafting whim, but rather a “serious strategic decision,” which was made clear by the underlying plaintiffs’ concession that they were seeking only economic damages and no damages for bodily injury. Although acknowledging the potential for coverage, the court noted that, to the extent that the underlying plaintiffs chose to amend their complaint to include factual allegations of bodily injury and damages resulting therefrom, Avent could re-tender the defense and the insurers would be obligated to defend, particularly in light of their admissions that they would be obligated to do so in such a circumstance.
The insurers also argued that Avent was judicially estopped from arguing that the underlying lawsuit stated a claim for bodily injury because, in Avent’s defense of the underlying lawsuit, it argued that the underlying plaintiffs made no claim of physical harm and that the underlying lawsuit was a “no-injury product liability claim.” The court rejected the judicial estoppel argument on the basis that Avent’s defense of the underlying lawsuit and the declaratory action were distinct. In the underlying lawsuit, Avent argued there were no alleged damages “for bodily injury.” In the declaratory action, Avent argued there were no alleged damages “because of bodily injury.” The court acknowledged that the distinction “may appear to be threading the judicial estoppel needle,” but noted that “[w]e must be careful when applying judicial estoppel in the duty to defend context.” It further stated:
If an insurance company refuses to defend its insured in a given case, that insured still must put forth a zealous defense. In doing so, the insured may have to attack the opponent’s case in ways that seem to remove it from the scope of the insurance contract. That does not necessarily absolve the insurance company from providing the exact same defense, or later reimbursing the insured for the defense. . . . [W]e must be cognizant of this tension when we consider applying this doctrine in these types of cases.