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Courts and Coverage

"Controlled Substance" Exclusion in Homeowners Policy Bars Coverage

Richard Valentino | September 1, 2004

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Prescription pill bottles and loose pills

In a recent case, the Illinois Appellate Court enforced a "controlled substance" exclusion in a homeowners policy to bar coverage for a suit alleging "market share" drug dealer liability. Such decisions complement drug dealer liability legislation—a growing trend in many states and territories. If liability under these statutes is insured, the legislative goals of deterrence and placement of costs on responsible parties would be defeated.

Statistical evidence shows that drug-related deaths and injuries are, unfortunately, relatively common events in the United States. In 2000 the Journal of the American Medical Association estimated that 17,000 deaths were the result of illicit drug use. The Drug Abuse Warning Network (DAWN) estimates that there were over 3 million drug-related emergency department contacts between 1998 and 2002. Drug overdose was by far the most common reason for the emergency department contact, constituting over 1.2 million of the contacts. Of those who contacted the emergency department for a drug-related episode during this time frame, 7,055 died.

In furtherance of the ongoing "War Against Drugs," a number of states have enacted legislation which imposes civil liability on individuals who participate in the marketing of controlled substances which cause injury or death. Generally speaking, such legislation creates causes of action against drug dealers and in favor of those who are injured through the ingestion of illegal drugs, as well as those non-users who are also injured as a consequence of the use of illegal drugs. This latter category of potential plaintiffs can include parents, siblings, children, employers, and insurers of the individual drug user, as well as persons who are injured by the negligent or willful conduct of the individual drug user. (See, for example, Illinois Statute 740 ILCS 57/25.)

Some statutes (or portions of statutes) require the plaintiff to prove that the drug dealer participated in the illegal marketing of the controlled substance which was "actually used" by the user. Other statutes impose civil liability based on the drug dealer's participation in the illegal drug market in connection with the same type of drug used by the individual user. Thus, an individual involved in drug distribution faces civil liability even if that individual did not actually sell the illegal drug to the end user. This type of legislation is meant to serve as a deterrent to drug dealing and to place the cost of damage caused by the existence of the illegal drug market in a particular community on those who illegal profit from that market.

Recent Case Law

Of course, with claims for damages because of injury or death come claims for liability insurance coverage. In the recent case of Westfield National Insurance Co., et al. v Long, 811 NE2d 776 (Ill App, 2nd Dist, 2004), the Illinois Appellate Court upheld the applicability of "drug related injury" exclusions in a homeowners policy and umbrella policy to bar coverage for an underlying wrongful death claim.

The underlying Aeschlimann lawsuit arose from the tragic death of a young woman, Sara Aeschlimann. Sara was attending a party in May 2000, when an individual allegedly placed a methamphetamine drug in her drink, leading to a toxic overdose that caused her death. Sara's mother brought a civil action against the individual who was alleged to have placed the drug in Sara's drink, as well as against other defendants who were alleged to have "knowingly participated in the chain of distribution" of the illegal drug that was actually digested by Sara. One of these other defendants was insured under a homeowners policy and personal umbrella policy issued by Westfield. Both policies contained the following exclusion:

We do not provide coverage for:

  • Bodily injury … arising out of the use, sale, manufacture, delivery, transfer or possession by any person of a Controlled Substance(s) as defined by the Federal Food and Drug Law.

The insured tendered the Aeschlimann complaint to Westfield, and Westfield responded by filing a complaint for declaratory judgment, seeking a declaration that, among other things, the above exclusion relieved Westfield of its duties to defend or indemnify the insured. Westfield was granted judgment on the pleadings in the trial court on the basis of the exclusion, and the appellate court affirmed.

On appeal, the insured contended that the drug exclusion in the Westfield policies did not apply because the allegations of the Aeschlimann complaint did not "directly link" him to the act that caused Sara's death. This argument was rejected by the appellate court. The complaint alleged that the insured had "knowingly participated in the chain of distribution of an illegal drug that was actually digested" by Sara. The court stated that these allegations "clearly fall within the sale, delivery, transfer or possession of methamphetamine," a drug which is a controlled substance under federal law.

The Westfield court also rejected the insured's contention that the phase employed in the exclusion, "arising out of," was vague and ambiguous and should therefore be construed in favor of coverage. The court held that the phrase "arising out of," when used in an exclusionary clause, should be given a "limited interpretation" in favor of the insured. However, even given such an interpretation, the court found that the only activity alleged against the insured in the Aeschlimann complaint—distribution of an illegal drug—fell squarely within Westfield's exclusion.

The Westfield case was one of first impression in Illinois. However, the court cited Prudential Property & Casualty Insurance Co. v Brenner, 350 NJ Super 316 (2002), in which the New Jersey appellate court construed a similar drug exclusion. In Brenner, the insured went to the home of a marijuana dealer with the express purpose of acquiring marijuana, either for free or by theft. During the attempt to obtain the marijuana, one of the insured's companions shot and killed the drug dealer. The dealer's mother commenced a wrongful death suit against the insured.

The Brenner court held that the language of the exclusion clearly and unambiguously barred coverage for underlying injuries "which arise out of, are connected with or are incident to the use and possession of illicit drugs." The court further held that even damages arising from an "attempt to gain illegal drugs" were excluded, since the insured's actions were "wholly focused on the use and possession of illegal drugs."


The Westfield case applies one of the most basic rules of policy construction—a court will not create ambiguity where none exists. The case (and the policy language) also furthers the purposes of drug dealer liability legislation. If liability under such statutes is insured, the legislative goals of deterrence and placement of costs on responsible parties would be defeated.

As of the preparation of this article, the following states and territory have enacted drug dealer civil liability legislation.

  • Arkansas—A.C.A. §16-124-101 et seq.
  • California—Cal. Health & Saf. Code §11700 et seq.
  • Colorado—C.R.S. 13-21-801 et seq.
  • Florida—Fla. Stat. §772.12
  • Georgia—OCGA §51-1-46
  • Illinois—740 ILCS 57/1 et seq.
  • Indiana—Burns Ind. Code Ann. §34-24-4-1 et seq.
  • Louisiana—La. R.S. 9:2800.61 et seq.`
  • Maryland—Md. Courts and Judicial Proceeding Code Ann. §3-1601 et seq.
  • Michigan—MCLS §691.1601 et seq.
  • New York—N.Y. CLS Gen Oblig §12-101 et seq.
  • New Jersey—N.J. Stat. §2C:35B-1 et seq.
  • Oklahoma—63 Okla. St. §2-421 et seq.
  • South Carolina—S.C. Code Ann. §44-54-10 et seq.
  • South Dakota—S.D. Codified Laws §34-20C-1
  • Utah—Utah Code Ann. §58-37e-1 et seq.
  • Virginia—Va. Code Ann. §8.01-227.4 et seq.
  • Virgin Islands—19 V.I.C. §641 et seq.

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