Phusion Projects, Inc. v. Selective Ins. Co. of S.C.

46 N.E.3d 1190

PHUSION PROJECTS, INC. and Phusion Projects, LLC, Plaintiffs–Appellants

v.SELECTIVE INSURANCE COMPANY OF SOUTH CAROLINA, Defendant–Appellee.

No. 1–15–0172.

Appellate Court of Illinois, First District, Fifth Division.

Dec. 18, 2015.

Reed Smith LLP, Chicago (John S. Vishneski III, Stanley C. Nardoni, and Jessica E. Brown, of counsel), for appellants.

Hinshaw & Culbertson LLP (Daniel K. Ryan, Dana A. Rice, and William P. Hardy, of counsel), for appellee.

OPINION

Presiding Justice REYES delivered the judgment of the court, with opinion.

¶ 1 Plaintiffs Phusion Projects, Inc. and Phusion Projects, LLC (collectively Phusion) brought an action for declaratory judgment against its commercial liability insurer, Selective Insurance Company of South Carolina (Selective). Phusion sought a declaration in the circuit court of Cook County that its insurance policy required Selective to defend and indemnify Phusion in six underlying lawsuits (underlying lawsuits). The underlying lawsuits generally alleged that the consumption of “Four Loko,” an alcoholic beveragemanufactured by Phusion, by certain individuals caused or contributed to the injuries they sustained. In a motion to dismiss pursuant to section 2–615 of the Illinois Code of Civil Procedure (Code) (735 ILCS 5/2–615 (West 2014) ), Selective claimed that it was not required to defend Phusion because the insurance policy contained a liquor liability exclusion. According to that exclusion, Selective was not required to defend or indemnify Phusion against any causes of action wherein it was alleged Phusion may be held liable for bodily injury by reason of causing or contributing to the intoxication of any person. The circuit court dismissed Phusion's complaint, finding Selective had no duty to defend or indemnify Phusion based on the unambiguous language of the exclusion. Phusion now appeals arguing Selective has a duty to defend because the six underlying lawsuits do not fall within the liquor liability exclusion. For the reasons that follow, we affirm.

¶ 2 BACKGROUND

¶ 3 A. The Parties

¶ 4 Phusion is the manufacturer of the alcoholic beverage “Four Loko,” which is sold through independent distributors. Four Loko is a fruit-flavored malt beverage that is sold in 23.5 ounce cans. Each can of Four Loko is 12% alcohol by volume. From August or September 2008 to November 2010, Four Loko contained caffeine, taurine, and guarana.

¶ 5 Selective is an insurer that provided coverage to Phusion, as the named insured, under a commercial general liability policy and a commercial umbrella coverage policy (insurance policy).¹

¶ 6 B. The Insurance Policy

¶ 7 Selective issued the insurance policy to Phusion for the period effective May 6, 2009 through May 6, 2010. The policy states, in pertinent part, that Selective “will pay those sums that the insured becomes legally obligated to pay as damages because of ‘bodily injury’ or ‘property damage’ to which this insurance applies. * * * However, we will have no duty to defend the insured against any ‘suit’ seeking damages for ‘bodily injury’ or ‘property damage’ to which this insurance does not apply * * *.” The policy defined the term “bodily injury” as “bodily injury, sickness or disease sustained by a person, including death resulted from any of these at any time.” The policy also contained a “liquor liability” exclusion, which provided that the insurance did not apply to:

“ ‘Bodily injury ’ or ‘property damage’ for which any insured may be held liable by reason of:

(1) Causing or contributing to the intoxication of any person;

(2) The furnishing of alcoholic beverages to a person under the legal drinking age or under the influence of alcohol; or

(3) Any statute, ordinance or regulation relating to the sale, gift, distribution or use of alcoholic beverages.

This exclusion applies only if you are in the business of manufacturing, distributing, selling, serving or furnishing alcoholic beverages.” (Emphases added.)

¶ 8 C. Procedural History

¶ 9 1. The Underlying Lawsuits²

¶ 10 a. The Aguirre Complaint

¶ 11 The first lawsuit involved Marlene Aguirre (Aguirre), who was struck and killed by a train. The Aguirre complaint alleged that after consuming a quantity of Four Loko, Aguirre was intoxicated and began to exhibit unusual and dangerous behavior. Aguirre, “in the state of mind induced by consuming Four Loko, decided to ‘moon’ the eastbound Amtrak train” and, in doing so, was struck and killed. It was further alleged that “[h]ad Marlene Aguirre only consumed alcohol, and not Four Loko, she would not have ‘mooned’ the Amtrak train, which caused her death.” But, “due to Four Loko's high caffeine content, and the presence of the stimulants guarana, taurine, and wormwood, she acted erratic, irresponsible, careless and with a defiant disregard for danger or consequences.” The complaint included two claims against Phusion; a “Negligence/Products Liability” claim and a “Strict Liability/Products Liability” claim.

¶ 12 b. The Frank–Adkins Complaint

¶ 13 The second lawsuit involved Donalyn Frank (Frank) who was killed in a motor vehicle accident caused by Daniel Rocca (Rocca) who drove recklessly after drinking Four Loko. Frank–Adkins alleged that Rocca became “severely impaired by intoxication” and was driving carelessly, aggressively, and recklessly at excessive speeds when he collided with the back of Frank's vehicle. The complaint further alleged that each 23.5 ounce can of Four Loko contained 12% alcohol by volume, 135 milligrams of caffeine, as well as guarana, taurine, and wormwood. According to the complaint, by combining these ingredients Phusion “intended for the stimulants and other ingredients to mask the intoxicating effects of the significant amount of alcohol contained in each Four Loko.” The complaint included six claims with 12 counts total against Phusion for negligence, negligent manufacturing, negligent failure to warn claims, negligent marketing, negligent labeling, and strict liability.

¶ 14 c. The Kellis Complaint

¶ 15 The Kellis complaint involved Joe Noah, Jr. (Noah), who was a passenger in a vehicle operated by David Deaton (Deaton) when it collided with a tree and Noah was killed. The complaint alleged Deaton consumed two 23.5 ounce cans of Four Loko in four hours immediately prior to driving his motor vehicle into a tree. According to the complaint, Four Loko contained “a dangerous combination of alcohol and stimulants, namely taurine, guarine [sic ], and caffeine.” The Kellis complaint includes one claim against Phusion for “negligent design, manufacture, testing, promotion, distribution [and] failure to warn.” ¶ 16 d. The Mathews Complaint

¶ 17 The fourth lawsuit involved Jewleon Bruce (Bruce), who died of acute alcohol poisoning after consuming cans of Four Loko and hard liquor. The Mathews complaint alleged Four Loko was “not reasonably safe and therefore defective as designed and/or formulated as the caffeine and energy enhancers masked and distorted the effects of the high alcohol content to cause consumers to continue to drink beyond safe and normal limits, and to suffer injuries, including alcohol sickness, poisoning, injuries, and death.” The complaint contained two counts against Phusion, including a Washington State Consumer Protection Act claim and a product liability claim.

¶ 18 e. The Marston Complaint

¶ 19 The Marston complaint was premised on the same set of facts as the Frank–Adkins complaint. The Marston complaint alleged that after consuming Four Loko, Rocca became intoxicated, drove recklessly, and caused a vehicle crash that severely injured Gail Marston (Marston) resulting in the amputation of her leg. The complaint set forth two counts each against Phusion for negligence, negligent failure to warn, and strict liability.

¶ 20 f. The McGuffie Complaint

¶ 21 The McGuffie complaint alleged that after consuming numerous other alcoholic beverages and a can of Four Loko Sean Walrath became intoxicated, drove a motor vehicle, and caused an automobile accident wherein Richard McGuffie (McGuffie) was injured. The complaint further alleged that McGuffie's injuries were a direct and proximate result of Phusion's negligent conduct in manufacturing Four Loko with “chemicals, including caffeine, that masked the feeling of intoxication.” The complaint consisted of two counts against Phusion; a negligence claim and “product defect” claim.

¶ 22 2. The Declaratory Judgment Action

¶ 23 In 2013, Phusion filed its initial complaint for declaratory judgment against Selective in the circuit court of Cook County. The complaint alleged four lawsuits had been filed against Phusion (Aguirre, Frank–Adkins, Kellis, and Mathews) and that Selective had declined to tender a defense to those lawsuits. Phusion sought a declaration from the circuit court that Selective had a duty to defend and indemnify it in those actions. Attached as exhibits to the complaint were the four underlying lawsuits as well as the insurance policies.

¶ 24 On January 10, 2014, Phusion was granted leave to file its first amended complaint which added, in pertinent part, facts regarding defendants' conduct and two more underlying lawsuits (Marston and McGuffie). The first amended complaint failed to attach as exhibits the complaints from the six underlying lawsuits. Thereafter, Phusion was granted leave to file a second amended complaint, which also did not include the complaints from the six underlying lawsuits.

¶ 25 On March 31, 2014, with leave of court, Phusion filed a third amended complaint which alleged five counts (I through V) against the Crissie defendants and two counts against Selective for violation of the Consumer Fraud and Deceptive Business Practices Act (815 ILCS 505/2 (West 2014) ) (count VI) and declaratory judgment (count VII). Subsequent to the briefing of the motion to dismiss, the Crissie defendants were voluntarily dismissed with prejudice along with counts I through VI. Count VII of the third amended complaint, the only count pertinent to this...