No Duty to Defend in Four Loko Lawsuits

     CHICAGO (CN) - Insurers of the maker of Four Loko do not have to indemnify the company in multiple personal injury lawsuits involving the alcoholic energy drink known as "Blackout in a Can," the 7th Circuit ruled.
     In 2010, several states banned Four Loko, a Phusion Projects malt liquor boosted with caffeine, guarana and taurine, as it gained a reputation for being "blackout in a can." A reformulated product introduced in 2011 does not contain the three aforementioned ingredients.
     Phusion also had to repackage the drink to settle Federal Trade Commission charges of misleading advertising. Though the old 23.5-ounce cans purported to be the equivalent to one or two cans of beer, the FTC said that the cans were 11 to 12 percent alcohol by volume, making the product equivalent to four or five 12-ounce cans of beer.
     The many plaintiffs who have sued Phusion claim that the caffeine makes drunk people underestimate their incapacity from the booze.
     One case concerns a man who alledgedly "accidentally shot and killed himself after consuming a number of cans of Four Loko and remaining awake for more than thirty hours."
     In another case, a passenger injured in a car accident says Four Loko caused her friend "to drive aggressively, carelessly, and at speeds over 100 miles per hour," leading to the accident that ejected her from the car.
     Plaintiffs allege that "the combination of alcohol and stimulants allows drinkers to consume more alcohol without passing out, causes drinkers to behave more erratically when intoxicated, and leads to other negative health effects," according to a summary by the Northern District of Illinois.
     Last year, a federal judge found that insurers Netherlands Insurance Co. and Indiana Insurance Co., both members of Liberty Mutual Group, are not required to indemnify Phusion because their policies exclude coverage for bodily or property damage caused by the sale of alcoholic beverages.
     On appeal, the 7th Circuit affirmed the ruling, rejecting Phusion's efforts to "disguise the role that intoxication allegedly played in the underlying cases."
     "We are not persuaded by Phusion's argument that its additional wrongdoing of adding energy stimulants to its drinks somehow invokes Liberty's duty to defend," Judge William Bauer said, writing for the three-judge panel.
     Although alcohol and stimulants are premixed in a can of Four Loko, Phusion claimed that the personal injury cases against it should be considered stimulant liability cases, rather than liquor liability cases.
     But "because of the very nature of the Four Loko product, the stimulants and alcohol cannot be separated," Bauer said. "The presence of energy stimulants in an alcoholic drink has no legal effect on the applicability of a liquor liability exclusion. The supply of alcohol, regardless of what it is mixed with, is the relevant factor to determine whether an insured caused or contributed to the intoxication of any person. While Phusion's choice of premixing energy stimulants and alcohol to make its Four Loko product might not have been a very good one, it does not amount to tortious conduct that is divorced from the serving of alcohol."
     The judge noted that Phusion could have paid for insurance that included liability coverage for alcohol-related incidents, but chose not to pay the higher premiums such coverage requires.
     Phusion sued other insurers in April 2013, claiming that the company was told it did not need liquor liability coverage because it did not sell liquor directly to consumers.