The insurance carrier that issued a “Products/Completed Operations Liability and Professional Liability Policy for Life Sciences” policy to 23andMe, Inc., a company that sold personal genome services to consumers, has filed a declaratory judgment action against its insured claiming that it has no duty to defend or indemnify 23andMe “(1) in lawsuits and arbitrations where the underlying plaintiffs seek restitution, disgorgement and other forms of relief that are not insurable under the Policy or the law, and; (2) with respect to a Civil Investigative Demand, [instituted by the Washington attorney general] which does not qualify as a Claim under the Policy.” Ironshore Specialty Ins. Co. v. 23andMe, Inc., No. 14-3286 (U.S. Dist. Ct., N.D. Cal., filed July 21, 2014).

According to the complaint, the insurance carrier has agreed to defend 23andMe in certain actions under a reservation of rights and further allowed the company to retain independent counsel who would be paid reasonable attorney’s fees. The complaint alleges that counsel has “submitted bills to Ironshore that seek payment of excessive and unreasonable attorney’s fees and costs, as well as attorney’s fees and costs that are not covered under the provisions of the Policy.” While the parties have apparently continued to discuss coverage issues, in the interim, the underlying plaintiffs have allegedly made a settlement demand that 23andMe “contends is covered by the Ironshore Policy.” Setting forth a number of policy provisions, the carrier claims that it has no duty to defend or indemnify under several exclusions and because the underlying actions do not qualify under definitions for damages and claims.

Further details about a court order sending a number of the underlying complaints to arbitration appear in Issue 81 of this Bulletin. The underlying plaintiffs allege that 23andMe falsely marketed the home DNA test kits and results as useful in diagnosing health conditions and preventing disease, when the results were actually inaccurate and incomplete and the product and service had not been approved by the U.S. Food and Drug Administration. They also apparently allege that the company “plans to use the genetic information it gathers about its customers to create a database that 23andMe can later market to physicians and pharmaceutical companies” and failed to adequately disclose these plans to consumers. Alleging economic injury, they seek return of the fees paid and disgorgement of profits.