Consumer class action claims are a familiar tool for addressing dissatisfaction with a defective product. Given that one of the goals of a consumer class action claim is to recover damages for the claimants, triggering insurance coverage for the defendant can be critical to a successful result. Likewise, defendants are eager to have an insurance company fund their defense, contribute to settlements or pay judgments. From the insurer perspective, due to the high potential damages, insurance companies take an aggressive stand to avoid coverage. Given these strong conflicting interests, the courts have issued a multitude of decisions with varying results. Similar to the developed body of law relating to coverage in defective construction cases, consumer products class actions have triggered disputes regarding: whether the complaint’s allegations meet the definition of an occurrence, property damage or bodily injury; when did the damage or injury occur; is anything more than economic loss or injury alleged; is there advertising injury or product disparagement, loss or injury alleged; and which product exclusions apply. This paper will focus on the elements necessary to trigger a duty to defend and the hurdles to be overcome to secure some funding for settlement or judgments.

General Principles Regarding Pleading -

Courts have not created any bright-line test as to what facts must be alleged to trigger coverage. One must consider not only factual allegations, but the entire complaint, including the damages suffered and the requested relief, to determine whether any potentially provable loss falls within the policy’s coverage. However, jurisdictions have ruled differently regarding whether courts should speculate on the facts necessary to support potential coverage. The Seventh Circuit held in Amerisure Mutual Insurance Co. v. Microplastics, Inc., 622 F.3d 806, 812 (7th Cir. (Ill.) 2010), that “the duty to defend applies only to facts that are explicitly alleged,” as “it is the actual complaint, not some hypothetical version, that must be considered.” Thus, the potentiality standard must be balanced against speculative theories of liability and hypothetical damages.