We are pleased to announce that Selective Insurance Company of South Carolina was bold enough to write coverage for Phusion Projects, LLC, the company that formerly manufactured Four Loko as we once knew it. Four Loko took all the hard work out of mixing alcohol and caffeine at the bar by combining the two in the manufacturing process. Yet Law 360 informs us Selective filed a DJ action in Illinois to clarify that there are certain suits it will not defend, based on a defense that the policy was not in force when the “bodily injury” alleged in several lawsuits occurred.
There seems to be very little of interest (at least at first glance) in the declaratory judgment complaint other than what we have previously blogged about in a prior Four Loko related post. Namely, Selective probably thought it was pretty safe (okay, somewhat safe) insuring this company since the beverage was merely a manufacturing of an aftermarket process. Moreover, although a DJ is always a good idea, as it puts lawyers to work who were previously not occupied, it remains to be seen whether this DJ will be effective. After all, Selective insured Phusion while it was manufacturing Four Loko and placing it in the stream of commerce. The dates of bodily injury in these cases may not be determinative. There certainly will have to be some scintillating discovery on dates of manufacture, lot numbers and dates of distribution before the lawyers reach the salacious details of surrounding the consumption of the Four Loko.
We don’t claim to be actuaries (Oh, that we had made that choice), but we would be interested to know from our legion of actuary readers how one would price products liability insurance for products such as Four Loko. We imagine the underwriter would gather some documents and get some input from actuarial and legal departments and the following exchange takes place:
UW: So, what are the chances for a lawsuit coming into being here? I mean, this seems to be a pretty safe product. Caffeine. Alcohol. There’s some kind of tagline about “blackout in a can” that’s somewhat troubling though.
Actuarial: [Speaking unintelligible secret mathy language]
In-house Lawyer: [Wearing a polo shirt, chinos, and no socks] I would put our chances at being sued at greater than 90%. Actuary, can you account for that in your pricing?
Actuarial: [Emitting a series of beeps]
In-house Lawyer: Don’t forget to account for the irresponsibility co-efficient of drunk young adults.
And eventually, a premium is settled upon that becomes a second-guessed business decision, and indirectly punishes innovation in the alcoholic energy drink market. Perhaps this is a good thing.