(Article from Insurance Law Alert, February 2016)
For more information, please visit the Insurance Law Alert Resource Center. A California federal district court ruled that an insurer was obligated to defend a class action suit alleging that a mattress company failed to warn consumers of harmful product defects because the complaint alleged “bodily injury.” Hartford Fire Ins. Co. v. Tempur-Sealy Int’l, Inc., 2016 WL 232431 (N.D. Cal. Jan. 20, 2016).
A class action complaint alleged that Tempur-Sealy failed to inform consumers that its products emitted a chemical odor that contained a known carcinogen and caused serious allergic reactions. Although the complaint contained numerous allegations relating to personal injuries, it explicitly stated that plaintiffs were not seeking damages for physical injuries. Rather, the underlying plaintiffs sought injunctive relief and compensatory, actual and statutory damages pursuant to various consumer protection statutes, as well as “such other and further relief as this Court may deem just and proper.” Hartford initially defended the suit, but later sought a declaration that the underlying claims were not covered by the policies. Both parties moved for summary judgment. The court ruled in favor of Tempur-Sealy, finding that the complaint at least potentially alleged damages for “bodily injury.”
Although the complaint did not assert any specific claims for bodily injury, the court reasoned that the statutory consumer protection claims incorporated and derived from factual allegations of bodily injuries. Therefore, the court concluded that the complaint demonstrated potential liability under the policy. The court rejected the argument that there was no duty to defend because the complaint expressly declined to seek damages for physical injuries, explaining that the plaintiffs’ “purported disavowal of bodily injury claims is not dispositive.” Finally, the court ruled that the complaint alleged an “occurrence” notwithstanding allegations of intentional fraud and deceit. The court held that the series of events leading up to the alleged misrepresentations – i.e., the manufacture and sale of defective mattresses –sufficiently alleged an unexpected “occurrence.”
The court relied on Plantronics, Inc. v. American Home Assurance Co., 2014 WL 2452577 (N.D. Cal. May 30, 2014), which required an insurer to defend a complaint that alleged facts supporting a potential claim for bodily injury but that explicitly disclaimed damages for physical injury. However, as reported in our July/August 2011 Alert, a California appellate court ruled that a failure-to-warn lawsuit alleging that nail products contained harmful toxins did not trigger an insurer’s duty to defend, because the complaint did not allege bodily injury. Ulta Salon, Cosmetics & Fragrance, Inc. v. Travelers Prop. Cas. Co. of Am., 127 Cal. Rptr.3d 444 (Cal. Ct. App. 2011). Although the underlying complaint in Ulta differed in some significant respects from the complaint in Tempur-Sealy, the Ulta court explicitly rejected the notion that a potential for coverage could be established by speculating about ways in which the complaint might be amended in the future.