Products-Completed Operations Exclusion Bars Coverage for Municipal Lawsuits Against a Gun Manufacturer
February, 2006
Facts
Beginning in 1999, numerous municipalities filed lawsuits against handgun manufacturers and other entities in the firearms industry, seeking injunctive relief and compensation for expenses incurred as a result of gun violence in their communities. The municipalities alleged that the firearms industry failed to make guns safe and prevent foreseeable misuse, failed to warn about the dangers of guns and distributed guns in excess of the legitimate demand, thereby fostering an illegal firearms market. The lawsuits alleged theories such as public and private nuisance, negligence, failure to warn and false advertising.
Gun manufacturer Taurus Holdings, Inc. was named as a defendant in these lawsuits. Taurus had commercial general liability insurance with USF&G and other carriers, which required the carriers to defend Taurus in “lawsuits seeking damages for bodily injury, property damage, advertising injury and personal injury.” These CGL policies, however, contained “products-completed operations hazard” exclusions barring coverage for “all bodily injury and property damage occurring away from premises you own or rent and arising out of your product or your work.”
In Taurus Holdings, Inc. v. United States Fidelity and Guaranty Co., 913 So.2d 528 (Fla. 2005), Taurus sued its insurers for coverage in the U.S. District Court for the Southern District of Florida. That court granted relief to the insurers, holding that the products-completed operations exclusion applied to the municipal claims. Taurus then appealed to the U.S. Court of Appeals for the Eleventh Circuit, which certified the coverage question to the Florida Supreme Court.
Analysis
The Florida Supreme Court held that the municipal claims for expenses incurred as a result of gun violence fell within the products-completed operations exclusion. In so doing, it rejected Taurus’ argument, based upon numerous out-of-state authorities, that the exclusion applies only when defective products are involved:
From our review of these cases, we draw three conclusions: first, most courts have not considered whether products-completed operations hazard exclusions should apply only to defective products; second, those that have are split on the issue; and third, the language of the policy is the most important factor. We do not believe that a fair reading of the exclusion at issue here would apply it only to defective products. Certainly the word “defective” is found nowhere in the exclusion. The language is much broader, applying the exclusion to “all bodily injury and property damage … arising out of your product.” The term “your product” is defined as “any goods or products … manufactured, sold, handled, distributed or disposed of by” Taurus. The word “any” before “goods or products” connotes a scope extending beyond merely defective products. Therefore, nothing in the text of the exclusion suggests it applies only to defective products.
913 So. 2d at 537.
The court also determined that the phrase “arising out of your product” in the exclusion is unambiguous and must be read to exclude all product-related injuries, not merely injuries from defective products. The court’s opinion is consistent with prior decisions of three federal courts. See Beretta U.S.A. Corp. v. Federal Ins. Co., 117 F. Supp. 2d 489 (D. Md. 2000), aff’d, 17 Fed. Appx. 250 (4th Cir. 2001) (unpublished); Brazas Sporting Arms, Inc. v. American Empire Surplus Lines Ins. Co., 220 F.3d 1 (1st Cir. 2000); and Massachusetts Bay Ins. Co. v. Bushmaster Firearms, Inc., 324 F.Supp.2d 110 (D. Me. 2004).
Learning Point:
Disputes over coverage for municipal lawsuits against the firearms industry could be a thing of the past. On October 26, 2005, President Bush signed into law the Protection of Lawful Commerce in Arms Act (“PLCAA”). The PLCAA immunizes gun makers and sellers from liability suits over the misuse of their products. Suits against companies that sell defective products or gun dealers who violate firearm sales regulations are still permissible. Motions to dismiss based upon the PLCAA have been filed in the three remaining municipal suits. Ruling on such a motion in the New York City case (New York City v. Beretta U.S.A. Corp, et al., E.D.N.Y., Case No. 00 CV 3641), the district court found the PLCAA constitutional, but held the nuisance suit brought against gun makers and sellers by the City of New York falls within a narrow exception in the PLCAA allowing suits against gun manufacturers if their sales or marketing practices violate state or federal statutes. The New York City case is now on appeal to the Second Circuit. Motions to dismiss based upon the PLCAA are still pending in lawsuits filed by the District of Columbia and the City of Gary, Indiana. We will continue to update our readers as new developments occur. •
Back to CM Report of Recent Decisions (2006v1) 2006 Volume 1 Table of Contents
