In the Northern District of California, a federal judge recently ruled that Ironshore Specialty Insurance Co. cannot use a policy exclusion to bar a genetic testing company’s request for coverage of proposed class claims that the tests are inaccurate. 23andMe Inc. is a genetic testing company that sells $99 kits that provide customers with analysis of their genetic code, including ancestry and various health risks. In November 2013, the FDA demanded that the company discontinue providing health testing results because the product was not approved by the FDA and could lead to false positives, which could lead to unnecessary surgery, or false negatives, which could leave its customers unaware of health risks.

Consumers filed several class actions after the FDA letter alleging that 23andMe falsely marketed the tests and misled customers about the test’s approval. 23andMe also received an investigative demand from Washington’s attorney general. Ironshore agreed to defend the company against the allegations, but in 2014 it asked for a declaration that it no longer has to defend or indemnify 23andMe in the actions. Ironshore argued that a contractual liability exclusion prevented coverage. Although no California precedent addressed the issue, the Court looked at other jurisdictions and found that Ironshore’s reading of the exclusion was inaccurate. The Court did determine, however, that Ironshore is not responsible for covering the cost of responding to the Washington investigative demand.

Source: Law360.com

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