Federal Appeals Court Rules That Insurer Has No Duty To Defend Maker Of Alcohol Stimulant Drink

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Back in 2005, three students at the Ohio State University developed a drink they called “Four Loko,” which contains alcohol, caffeine, taurine and guarana. Four people have sued the makers of “Four Loko,” contending that the drink causes crazy behavior. For example, in one case, two passengers sued the beverage maker after the driver of the car they were in drank “Four Loko,” and then drove at 100 miles per hour and crashed the car.

After the lawsuits were filed, the insurer of the makers of “Four Loco” sought a court ruling that it had no duty to defend against the lawsuits, because the insurance policy it issued to the drink maker contained an exclusion which barred coverage for any liability “causing or contributing to the intoxication of any person.” A federal district court in Illinois agreed with the insurer. On appeal, the makers of “Four Loco” argued that the lawsuits also involved “stimulant liability,” and that the insurance policy contained no exclusion for liability based upon stimulants. The United States Court of Appeals for the Seventh Circuit disagreed and affirmed the district court decision, holding that the presence of stimulants in the drink did not change the fact that the alcohol liability exclusion in the insurance policy did not provide coverage for the claims against the makers of “Four Loco.”