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

Case 5:12-cv-00137-XR Document 1
Filed 02/14/12 Page 1 of 6
IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF TEXAS SAN ANTONIO DIVISION ILLINOIS UNION INSURANCE COMPANY, Plaintiff, v. KINETIC CONCEPTS, INC.; AND LIFECELL CORPORATION, Defendants.
No. 5:12-cv-00137
PLAINTIFF ILLINOIS UNION INSURANCE COMPANYS COMPLAINT 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.
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.
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.
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 or products manufactured or distributed by the Named Insured shall be 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.
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. 19. Illinois Union incorporates by reference all preceding paragraphs. 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 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; All other relief the Court deems appropriate.
b.
Respectfully submitted: /s/ Joseph A. Ziemianski Joseph A. Ziemianski Texas State Bar No. 00797732 Bryan P. Vezey Texas State Bar No. 00788583 COZEN OCONNOR 1221 McKinney, Suite 2900 Houston, Texas 77009 Telephone: (832) 214-3900 Telecopier: (832) 214-3905 ATTORNEYS FOR PLAINTIFF, ILLINOIS UNION INSURANCE COMPANY
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2JS 44 (Rev. 12/07)
Filed CIVIL COVER SHEET 02/14/12 Page 1 of 1
The 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 provided by 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 initiating the civil docket sheet. (SEE INSTRUCTIONS ON THE REVERSE OF THE FORM.)
ILLINOIS UNION INSURANCE COMPANY
I. (a) PLAINTIFFS
DEFENDANTS
KINETIC CONCEPTS, INC. and LIFECELL CORPORATION Bexar County
(b) County of Residence of First Listed Plaintiff

(EXCEPT IN U.S. PLAINTIFF CASES)
County of Residence of First Listed Defendant
(IN U.S. PLAINTIFF CASES ONLY) NOTE: IN LAND CONDEMNATION CASES, USE THE LOCATION OF THE LAND INVOLVED.
Cozen O'Connor, 1221 McKinney Street, Suite 2900, Houston, Texas 77010; (832) 214-3900
(c) Attorneys (Firm Name, Address, and Telephone Number)
Attorneys (If Known)
II. BASIS OF JURISDICTION

u 1
U.S. Government Plaintiff
(Place an X in One Box Only)
III. CITIZENSHIP OF PRINCIPAL PARTIES(Place an X in One Box for Plaintiff

(For Diversity Cases Only) PTF Citizen of This State u 1 Citizen of Another State DEF u 1 and One Box for Defendant) PTF DEF Incorporated or Principal Place u 4 u 4 of Business In This State Incorporated and Principal Place of Business In Another State Foreign Nation
u 3 Federal Question (U.S. Government Not a Party) u 4 Diversity

(Indicate Citizenship of Parties in Item III)
u 2
U.S. Government Defendant
u 2 u 3
u u
u 5 u 6
u 5 u 6
Citizen or Subject of a Foreign Country
IV. NATURE OF SUIT

CONTRACT
(Place an X in One Box Only) TORTS PERSONAL INJURY 310 Airplane 315 Airplane Product Liability 320 Assault, Libel & Slander 330 Federal Employers Liability 340 Marine 345 Marine Product Liability 350 Motor Vehicle 355 Motor Vehicle Product Liability 360 Other Personal Injury CIVIL RIGHTS 441 Voting 442 Employment 443 Housing/ Accommodations 444 Welfare 445 Amer. w/Disabilities Employment 446 Amer. w/Disabilities Other 440 Other Civil Rights PERSONAL INJURY u 362 Personal Injury Med. Malpractice u 365 Personal Injury Product Liability u 368 Asbestos Personal Injury Product Liability PERSONAL PROPERTY u 370 Other Fraud u 371 Truth in Lending u 380 Other Personal Property Damage u 385 Property Damage Product Liability PRISONER PETITIONS u 510 Motions to Vacate Sentence Habeas Corpus: u 530 General u 535 Death Penalty u 540 Mandamus & Other u 550 Civil Rights u 555 Prison Condition
FORFEITURE/PENALTY
BANKRUPTCY
OTHER STATUTES
u u u u u u u u u u u u u u u u u u
110 Insurance 120 Marine 130 Miller Act 140 Negotiable Instrument 150 Recovery of Overpayment & Enforcement of Judgment 151 Medicare Act 152 Recovery of Defaulted Student Loans (Excl. Veterans) 153 Recovery of Overpayment of Veterans Benefits 160 Stockholders Suits 190 Other Contract 195 Contract Product Liability 196 Franchise REAL PROPERTY 210 Land Condemnation 220 Foreclosure 230 Rent Lease & Ejectment 240 Torts to Land 245 Tort Product Liability 290 All Other Real Property
u u u u u u u u u u u u u u u u
u 610 Agriculture u 620 Other Food & Drug u 625 Drug Related Seizure of Property 21 USC 881 u 630 Liquor Laws u 640 R.R. & Truck u 650 Airline Regs. u 660 Occupational Safety/Health u 690 Other LABOR u 710 Fair Labor Standards Act u 720 Labor/Mgmt. Relations u 730 Labor/Mgmt.Reporting & Disclosure Act u 740 Railway Labor Act u 790 Other Labor Litigation u 791 Empl. Ret. Inc. Security Act
IMMIGRATION u 462 Naturalization Application u 463 Habeas Corpus Alien Detainee u 465 Other Immigration Actions
u 422 Appeal 28 USC 158 u 423 Withdrawal 28 USC 157

PROPERTY RIGHTS u 820 Copyrights u 830 Patent u 840 Trademark
u u u u u u u u u u u u u u u u u u u
SOCIAL SECURITY 861 HIA (1395ff) 862 Black Lung (923) 863 DIWC/DIWW (405(g)) 864 SSID Title XVI 865 RSI (405(g)) FEDERAL TAX SUITS u 870 Taxes (U.S. Plaintiff or Defendant) u 871 IRSThird Party 26 USC 7609
u u u u u
400 State Reapportionment 410 Antitrust 430 Banks and Banking 450 Commerce 460 Deportation 470 Racketeer Influenced and Corrupt Organizations 480 Consumer Credit 490 Cable/Sat TV 810 Selective Service 850 Securities/Commodities/ Exchange 875 Customer Challenge 12 USC 3410 890 Other Statutory Actions 891 Agricultural Acts 892 Economic Stabilization Act 893 Environmental Matters 894 Energy Allocation Act 895 Freedom of Information Act 900Appeal of Fee Determination Under Equal Access to Justice 950 Constitutionality of State Statutes
V. ORIGIN
u 1 Original Proceeding
(Place an X in One Box Only)
Appeal to District Appellate Court
u 2 Removed from
State Court
u 3 Remanded from
u 4 Reinstated or u 5 Transferred from u 6 Multidistrict another district Reopened Litigation (specify)
u 7 Judge from Magistrate

Judgment
Cite the U.S. Civil Statute under which you are filing (Do not cite jurisdictional statutes unless diversity):
VI. CAUSE OF ACTION Brief description of cause:
28 U.S.C. 1332(a)(1)
CHECK YES only if demanded in complaint: Yes u u No JURY DEMAND: DOCKET NUMBER
declaratory judgment
DEMAND $ u CHECK IF THIS IS A CLASS ACTION VII. REQUESTED IN 1,000,000.00 UNDER F.R.C.P. 23 COMPLAINT: VIII. RELATED CASE(S) (See instructions): JUDGE IF ANY
DATE SIGNATURE OF ATTORNEY OF RECORD
02/14/2012
FOR OFFICE USE ONLY RECEIPT # AMOUNT
/s/ Joseph A. Ziemianski
APPLYING IFP
JUDGE
MAG. JUDGE

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

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

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Case 5:12-cv-00137-XR Document 1

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

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The plaintiffs describe AlloDerm as a biologic product processed from donated

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