Traub Lieberman's Meryl R. Lieberman and Eric D. Suben Obtained Summary Judgment in Coverage Case Against Insured Accused of False Representation of Supplements In an Underlying Class Action Lawsuit

May 20, 2009

TLS&S' attorneys Meryl R. Lieberman and Eric D. Suben obtained summary judgment in favor of an insurer in an underlying class action lawsuit alleging that the insured falsely represented the attributes of a male sexual enhancement supplement it manufactures and markets. In Evanston Insurance Company v. Bodee, LLC and Josef Salomon, the United States District Court for the Central District of California held on May 19, 2009 that Evanston has no duty to defend or indemnify Bodee, its insured, in the underlying action for claims of fraudulent concealment and unfair business practices. The Court dismissed the insured's counterclaim for bad faith with prejudice and without leave to replead, and granted Evanston's declaration that it is entitled to recoup fees expended in Bodee's defense in the underlying action.

The underlying action alleged that Bodee marketed an over the counter herbal sexual perfomance enhancer as an all-natural alternative to prescription drugs for men who suffer from erectile dysfunction or sexual performance issues, and advertised the product as safe and effective. The product was voluntarily recalled after the United States FDA revealed that the product contained "harmful and undelcared ingredients" that might pose a health risk to men taking prescription medications containing nitrates.

The Court found that the complaint did not set forth a claim for "bodily injury" merely because it alleged that the putative class has been put at risk that the nitrates in their prescription drugs will mix with the undeclared chemicals, or that the product may lower blood pressure to dangerous levels. Rather, the Court found that the suit is not one for physical injury but rather economic relief in the form of restitution of the purchase price.

Similarly, the Court found that restitution or loss of antipicated value does not constitute "property damage" as defined in the policy.

Ruling further, the Court held that the alleged false marketing did not constitute an "occurrence" and the injunctive relief and restitution sought did not constitute "damages." Any monetary damages awarded for the fraudulent concealment claim were specifically excluded because fraudulent concealment is a claim uninsurable under California law.

Because the Court found that Evanston had no duty to defend from the outset and properly reserved its right to recoup defense costs expended in the underlying action, the Court awarded recoupment of all fees.