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The sky isn’t the limit for a New Jersey insurance firm that says it won’t foot Skyy Spirits’ legal bills as the vodka distiller fights accusations that its ads target underage drinkers. In one of at least two potential class actions against Skyy, plaintiffs lawyers claim that a bevy of alcohol purveyors — names like Anheuser-Busch, Bacardi and Heineken — have a “long-running, sophisticated and deceptive scheme” to market certain alcoholic beverages to people under age 21, to earn “billions of dollars per year in unlawful revenue.” Though it’s still early in the litigation, Federal Insurance Co. is already trying to head off a financial hangover. In a complaint filed in San Francisco last month, the insurer asked the superior court to declare that it doesn’t have to pick up Skyy’s legal tab and that it shouldn’t have to cover any damages if the distiller loses the litigation against it. The plaintiffs in Eisenberg v. Anheuser-Busch, 04-1081, in which Skyy is also a defendant, want the court to make the companies disgorge the profits they’ve allegedly taken in by selling to underage drinkers. The plaintiffs’ claims are echoed in a handful of other potential class actions around the country. Eisenberg, filed in U.S. District Court for the Northern District of Ohio, asserts that “at least 15 to 20 percent of all alcoholic beverages sold in the United States are consumed by minors, resulting in billions of dollars per year in illegal profits for defendants.” Skyy’s outside counsel, Wesley Kinnear, contends that the vodka maker is being prejudiced by its own insurance carrier. “The insurance company is supposed to defend its insured, not make its insured fight on two fronts at the same time,” he said. Though Skyy bought policies that cover advertising as well as general liability, the insurance company says none of its coverage could possibly apply to the damages the potential class members are seeking if Skyy loses. The insurance company’s lawyers at Newton Remmel in Mountain View, Calif., declined to comment on the case. But in its complaint, Federal Insurance argues, in part, that the accusations all have to do with “deliberate, reckless and illegal” conduct. “We don’t think any of the exclusions that they’re citing apply,” countered Kinnear, a partner at Holme Roberts & Owen in San Francisco. Some other defendants in the litigation have seen similar resistance from their carriers, he added. Federal has tried a similar move before, in the Northern District of California. When the insurance company sought similar declaratory relief there, Skyy asked the court to put off that question until after the underlying litigation resolved, or dismiss it all together. Citing arguments of improper jurisdiction, U.S. District Judge Marilyn Hall Patel threw the complaint out. She suggested the insurance company could refile in federal court in Ohio, where Skyy is defending itself in the underlying suit. “The interests of judicial economy are best served by resolving all claims related to the underlying tort action in the same forum,” she wrote.

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