Illinois Union Insurance Company v. Kinetic Concepts, Inc. Et Al. - Complaint, Exhibits, Operating Liability Policy

8/3/2019 Illinois Union Insurance Company v. Kinetic Concepts, Inc. Et Al. - Complaint, Exhibits, Operating Liability Policy

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IN THE UNITED STATES DISTRICT COURTFOR THE WESTERN DISTRICT OF TEXAS

SAN ANTONIO DIVISION

ILLINOIS UNION INSURANCE

COMPANY,

Plaintiff,

v. No. 5:12-cv-00137

KINETIC CONCEPTS, INC.; ANDLIFECELL CORPORATION,

Defendants.

PLAINTIFF ILLINOIS UNION INSURANCE COMPANYSCOMPLAINT AND REQUEST FOR DECLARATORY JUDGMENT

Plaintiff Illinois Union Insurance Company (Illinois Union) files this Complaint and

Request for Declaratory Judgment against defendants Kinetic Concepts, Inc. (Kinetic) and

LifeCell Corporation (LifeCell) and in support respectfully shows the Court the following:

PARTIES

1. Plaintiff Illinois Union is an Illinois corporation that has its principal place of

business in Chicago, Illinois and is authorized to do business in Texas.

2. Defendant Kinetic is a Texas corporation with its principal place of business in

San Antonio, Texas. It is joined to this suit as an interested party defendant in that it is the

company that procured the insurance policies made the subject of this suit for itself and its

subsidiaries, including LifeCell. Kinetic did so in its San Antonio, Texas office through an

Austin, Texas broker. Kinetic has also represented LifeCell in communications with Illinois

Union concerning the substantive issue presented by this complaint. Kinetic may be served with

process through its registered agent, CT Corporation System, 350 N. St. Paul St., Ste. 2900,

Dallas, Texas 75201.

Case 5:12-cv-00137-XR Document 1 Filed 02/14/12 Page 1 of 6


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3. Defendant LifeCell is a Delaware corporation with its principal place of business

in Branchburg, New Jersey. LifeCell maintains an office in San Antonio, Texas and otherwise

regularly conducts business in Texas. LifeCell may be served with process through its registered

agent, CT Corporation System, 350 N. St. Paul St., Ste. 2900, Dallas, Texas 75201.

JURISDICTION AND VENUE

4. The Court has jurisdiction over the lawsuit under 28 U.S.C. 1332(a)(1) because

the plaintiff and defendant are citizens of different states and the amount in controversy exceeds

$75,000, excluding interest and costs.

5. Venue is proper in the Western District of Texas pursuant to 28 U.S.C.

1391(a)(1) and (2).

FACTS

Introduction

6. Illinois Union seeks a declaratory judgment establishing the number of self-

insured retentions (SIRs) under the policies it issued to Kinetic and LifeCell that apply to

products liability litigation arising out of the use of AlloDerm Regenerative Tissue Matrix

(AlloDerm), as described in more detail below.

Underlying Litigation

7. LifeCell is a defendant in a legal proceeding entitled In Re: AlloDerm

Litigation, Case No. 295, In the Superior Court of New Jersey, Law Division, Middlesex County,

New Jersey (the Underlying Litigation) involving over 60 individual plaintiffs. A copy of the

Master Long Form Complaint for Hernia Repair and Abdominal Reconstruction in that

proceeding is attached as Exhibit 1.



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8. The plaintiffs describe AlloDerm as a biologic product processed from donated

human tissue that LifeCell began producing in 1992. This product was first used, according to

the complaint, for burn patients and in periodontal or reconstructive surgeries.

9. Around 2000, the complaint relates, LifeCell began marketing AlloDerm for use

in hernia repair surgery. The underlying plaintiffs allege that the product was not appropriate for

this use, and they assert several products liability causes of action, both common law and

statutory, for various injuries allegedly sustained by them at different times over the dozen years

from 2000 though the present. Upon information and belief, the alleged injuries occurred at

different times and were different, to some degree, in kind.

10. The underlying plaintiffs reside in and sustained their alleged injuries in different

states, including but not limited to California, Florida, Iowa, Michigan, New Hampshire, New

York, North Carolina, Ohio, Oklahoma, Pennsylvania, Virginia and Wisconsin.

11. Based on information provided by Kinetic, the subject AlloDerm products were

manufactured and distributed in numerous lots, and at least 31 of these have been identified to

date.

The Policies

12. Illinois Union issued Policy No. SPL G23855343 002 to Kinetic as the first

named insured for the period of May 1, 2010 to May 1, 2011. Kinetics subsidiaries, including

LifeCell, are additional named insureds. The policy is entitled Life Sciences Products-

Completed Operations Liability Policy Claims Made, and bears limits of $10 million for each

occurrence and in the aggregate, subject to a $500,000 self-insured retention (SIR) for each

occurrence. A copy of this policy is attached as Exhibit 2.



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13. Illinois Union issued a renewal policy under Policy No. SPL G23855343 003 for

the period May 1, 2011 to May 1, 2012, with materially the same named insureds, limits and

SIR. A copy of this policy is attached as Exhibit 3.

Number of SIRs

14. Both policies contain an SIR endorsement. The 2010-11 policy contains form

number PF-13060a (09/04), and the 2011-12 policy contains form number PF-33744 (04/11).

There are differences between the two forms, but the differences are not salient to this

discussion. Both forms specify a $500,000 SIR for all bodily injury and property damage

arising out of any one occurrence, and it is the application of this language to the AlloDerm

product claims that is the issue before the Court.

15. The same forms state that Illinois Unions obligations, inclusive of any duty to

defend or pay defense costs, are in excess of the SIR, and that the insured is required to bear

at [its] own risk all damages and defense costs up to and including the amount of the [SIR].

In no event, the forms state, will Illinois Unions obligations commence until the insured has

exhausted the SIR.

16. The policies also contain a batch clause that collapses all injuries resulting from a

single lot of the insureds products into a single occurrence. The number of occurrences

determined by the batch clause controls the number of SIRs. The batch clause states:

It is agreed that all damages arising out of one lot of goods orproducts manufactured or distributed by the Named Insured shallbe considered as arising out of one occurrence.

Due to this clause, all damages arising out of one lot of AlloDerm products correspond to a

single occurrence, so that in this case there would be as many occurrences, and thus SIRs, as

there are implicated lots of AlloDerm.



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17. LifeCell has nevertheless taken the position that all of the underlying claims

must be considered to be a single occurrence under [Illinois Union] policy # SPL G23855343

002 with a single cost erosive $500,000 self-insured retention applying. Thus, a live controversy

exists between the plaintiff and the defendants regarding the number of SIRs applicable to the

Underlying Litigation.

COUNT I DECLARATORY JUDGMENT

18. Illinois Union incorporates by reference all preceding paragraphs.

19. For the reasons stated above, Illinois Union requests the Court to grant a

declaratory judgment establishing that there is a separate SIR for each lot of AlloDerm

implicated by the Underlying Litigation, and that Illinois Union has no obligations relative to

claims arising out of any particular lot until the SIR applicable to that lot is exhausted.

JURY DEMAND

20. Illinois Union demands a trial by jury on all issues of fact, if any.

PRAYER

For these reasons, Illinois Union asks for judgment against LifeCell and for the

following:

a. A declaratory judgment that there is a separate SIR for each lot ofAlloDerm implicated by the Underlying Litigation, and that Illinois Unionhas no obligations relative to claims arising out of any particular lot untilthe SIR applicable to that lot is exhausted;

b. All other relief the Court deems appropriate.



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Respectfully submitted:

/s/ Joseph A. Ziemianski

Joseph A. Ziemianski

Texas State Bar No. 00797732Bryan P. VezeyTexas State Bar No. 00788583COZEN OCONNOR1221 McKinney, Suite 2900Houston, Texas 77009Telephone: (832) 214-3900Telecopier: (832) 214-3905

ATTORNEYS FOR PLAINTIFF,ILLINOIS UNION INSURANCE COMPANY



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Case 5:12-cv-00137-XR Document 1-1 Filed 02/14/12 Page 1 of 21


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2JS 44 (Rev. 12/07) CIVIL COVER SHEETThe JS 44 civil cover sheet and the information contained herein neither replace nor supplement the filing and service of pleadings or other papers as required by law, except as pry local rules of court. This form, approved by the Judicial Conference of the United States in September 1974, is required for the use of the Clerk of Court for the purpose of inhe civil docket sheet. (SEE INSTRUCTIONS ON THE REVERSE OF THE FORM.)

. (a) PLAINTIFFS DEFENDANTS

(b) County of Residence of First Listed Plaintiff County of Residence of First Listed Defendant(EXCEPT IN U.S. PLAINTIFF CASES) (IN U.S. PLAINTIFF CASES ONLY)

NOTE: IN LAND CONDEMNATION CASES, USE THE LOCATION OF THE

LAND INVOLVED.

(c) Attorneys (Firm Name, Address, and Telephone Number) Attorneys (If Known)

I. BASIS OF JURISDICTION (Place an X in One Box Only) III. CITIZENSHIP OF PRINCIPAL PARTIES(Place an X in One Box for P(For Diversity Cases Only) and One Box for Defendant

u 1 U.S. Government u 3 Federal Question PTF DEF PTF D

Plaintiff (U.S. Government Not a Party) Citizen of This State u 1 u 1 Incorporated orPrincipal Place u 4

of Business In This State

u 2 U.S. Government u 4 Diversity Citizen of Another State u 2 u 2 Incorporated andPrincipal Place u 5

Defendant(Indicate Citizenship of Parties in Item III)

of Business In Another State

Citizen or Subject of a u 3 u 3 Foreign Nation u 6

Foreign Country

V. NATURE OF SUIT (Place an X in One Box Only)CONTRACT TORTS FORFEITURE/PENALTY BANKRUPTCY OTHER STATUTE

u 110 Insurance PERSONAL INJURY PERSONAL INJURY u 610 Agriculture u 422 Appeal 28 USC 158 u 400 State Reapportionm

u 120 Marine u 310 Airplane u 362 Personal Injury - u 620 Other Food & Drug u 423 Withdrawal u 410 Antitrust

u 130 Miller Act u 315 Airplane Product Med. Malpractice u 625 Drug Related Seizure 28 USC 157 u 430 Banks and Banking

u 140 Negotiable Instrument Liability u 365 Personal Injury - of Property 21 USC 881 u 450 Commerce

u 150 Recovery of Overpayment u 320 Assault, Libel & Product Liability u 630 Liquor Laws PROPERTY RIGHTS u 460 Deportation

& Enforcement of Judgment Slander u 368 Asbestos Personal u 640 R.R. & Truck u 820 Copyrights u 470 Racketeer Influence

u 151 Medicare Act u 330 Federal Employers Injury Product u 650 Airline Regs. u 830 Patent Corrupt Organizatio

u 152 Recovery of Defaulted Liability Liability u 660 Occupational u 840 Trademark u 480 Consumer Credit

Student Loans u 340 Marine PERSONAL PROPERTY Safety/Health u 490 Cable/Sat TV

(Excl. Veterans) u 345 Marine Product u 370 Other Fraud u 690 Other u 810 Selective Service

u 153 Recovery of Overpayment Liabil ity u 371 Truth in Lending LABOR SOCIAL SECURITY u 850 Securities/Commod

of Veterans Benefits u 350 Motor Vehicle u 380 Other Personal u 710 Fair Labor Standards u 861 HIA (1395ff) Exchange

u 160 Stockholders Suits u 355 Motor Vehicle Property Damage Act u 862 Black Lung (923) u 875 Customer Challenge

u 190 Other Contract Product Liability u 385 Property Damage u 720 Labor/Mgmt. Relations u 863 DIWC/DIWW (405(g)) 12 USC 3410

u 195 Contract Product Liability u 360 Other Personal Product Liability u 730 Labor/Mgmt.Reporting u 864 SSID Title XVI u 890 Other Statutory Acti

u 196 Franchise Injury & Disclosure Act u 865 RSI (405(g)) u 891 Agricultural Acts

REAL PROPERTY CIVIL RIGHTS PRISONER PETITIONS u 740 Railway Labor Act FEDERAL TAX SUITS u 892 Economic Stabilizat

u 210 Land Condemnation u 441 Voting u 510 Motions to Vacate u 790 Other Labor Litigation u 870 Taxes (U.S. Plaintiff u 893 Environmental Mat

u 220 Foreclosure u 442 Employment Sentence u 791 Empl. Ret. Inc. or Defendant) u 894 Energy Allocation A

u 230 Rent Lease & Ejectment u 443 Housing/ Habeas Corpus: Security Act u 871 IRSThird Party u 895 Freedom of Informa

u 240 Torts to Land Accommodations u 530 General 26 USC 7609 Act

u 245 Tort Product Liability u 444 Welfare u 535 Death Penalty IMMIGRATION u 900Appeal of Fee Determ

u 290 All Oth R l P t u 445 A /Di biliti u 540 M d & Oth u 462 N t li ti A li ti U d E l A

LINOIS UNION INSURANCE COMPANY

zen O'Connor, 1221 McKinney Street, Suite 2900, Houston, Texas010; (832) 214-3900

KINETIC CONCEPTS, INC. and LIFECELL CORPORATION

Bexar County


Documents

Illinois Union Insurance Company v. Kinetic Concepts, Inc. Et Al. - Complaint, Exhibits, Operating Liability Policy