Dallas-based USPlabs’ insurance provider has been seeking a court declaration that it should not have to defend or indemnify the supplement manufacturer because the company distributed products that were not FDA compliant.

Josh Long, Associate editorial director, Natural Products Insider

April 20, 2016

3 Min Read
Judge Halts Aegeline Insurance Lawsuit against USPlabs

A federal judge on Monday granted a stay in a lawsuit filed in October against USPlabs LLC by an insurance company pending the resolution of criminal proceedings facing the dietary supplement manufacturer and its executives.

Gemini Insurance Co. sought a declaration that USPlabs was not covered by an excess liability insurance policy because, in part, the policy precluded coverage for products that were distributed by USPlabs without complying with FDA requirements.

Gemini’s lawsuit was filed 47 days before the U.S. Department of Justice announced an 11-count criminal indictment against USPlabs and its executives.

On April 18, based on the recommendation of a magistrate judge, U.S. District Judge Sam Lindsay stayed or halted the Gemini lawsuit pending the resolution of the criminal cases.

Representatives for Gemini and USPlabs, which has denied wrongdoing in the criminal prosecution, did not immediately respond Wednesday to requests for comment.

Dallas-based USPlabs has been sued by more than 100 individuals over liver-related injuries allegedly caused by ingestion of supplements containing aegeline. The lawsuits seek punitive damages based on the company’s “knowing, conscious and deliberate disregard for the rights and safety of consumers," according to Gemini’s Oct. 1, 2015 complaint.

At least 13 aegeline cases are pending in Hawaii, where a number of consumers who had taken USPlabs’ OxyElite Pro dietary supplements fell ill in 2013, court records show. Other lawsuits have been filed in California, Pennsylvania and New Jersey.

Gemini’s complaint for declaratory relief cited a number of reasons for its insurance policy not covering the legal claims filed against USPlabs. For instance, it said the policy excluded coverage for products that FDA deemed a “Class I Health Hazard," which is defined as “products presenting a reasonable probability that the use of or exposure to it will cause serious adverse health consequences or death."

On Nov. 6, 2013, FDA threatened USPlabs in a letter that it could order the company to stop distributing certain dietary supplements if the company did not initiate a voluntary recall. In a report to Congress last year, the agency said the action marked just the second time it exercised its recall authority under the 2011 FDA Food Safety Modernization Act (FSMA) by sending such a letter.

In a Jan. 22, 2014 weekly enforcement report, FDA identified the reason for the recall and classified the risk as “Class I," according to Gemini’s complaint. “Accordingly, because the FDA determined that the aegeline products presented the highest degree of health hazard (Class I), the specified products exclusion applies and Gemini accordingly has no defense or indemnity obligation to USP," Gemini alleged.

On March 23, in agreeing to stay a separate complaint filed against USPlabs by Gemini, U.S. District Judge Ed Kinkeade reasoned issues in one underlying criminal case brought by the federal government conflicted with those in the insurance dispute, the legal news service Law360 reported. The complaint relates to legal claims filed against USPlabs in connection with dietary supplements that contained DMAA.

In the summer of 2013, FDA reported that it had received reports of more than 100 illnesses associated with products containing DMAA, including six deaths. Many companies including USPlabs have stopped selling DMAA after FDA issued a number of warning letters in 2012 and later moved to seize products, but as INSIDER reported last year, the ingredient is still being sold and is the subject of litigation between FDA and the industry.

About the Author(s)

Josh Long

Associate editorial director, Natural Products Insider, Informa Markets Health and Nutrition

Josh Long directs the online news, feature and op-ed coverage at Natural Products Insider, which targets the health and wellness industry. He has been reporting on developments in the dietary supplement industry for over a decade, with a focus on regulatory issues, including at the Food and Drug Administration.

He has moderated and/or presented at industry trade shows, including SupplySide East, SupplySide West, Natural Products Expo West, NBJ Summit and the annual Dietary Supplement Regulatory Summit.

Connect with Josh on LinkedIn and ping him with story ideas at [email protected]

Education and previous experience

Josh majored in journalism and graduated from Arizona State University the same year "Jake the Snake" Plummer led the Sun Devils to the Rose Bowl against the Ohio State Buckeyes. He also holds a J.D. from the University of Wyoming College of Law, was admitted in 2008 to practice law in the state of Colorado and spent a year clerking for a state district court judge.

Over more than a quarter century, he’s written on various topics for newspapers and business-to-business publications – from the Yavapai in Arizona and a controversial plan for a nuclear-waste incinerator in Idaho to nuanced issues, including FDA enforcement of the Dietary Supplement Health and Education Act of 1994 (DSHEA).

Since the late 1990s, his articles have been published in a variety of media, including but not limited to, the Cape Cod Times (in Massachusetts), Sedona Red Rock News (in Arizona), Denver Post (in Colorado), Casper Star-Tribune (in Wyoming), now-defunct Jackson Hole Guide (in Wyoming), Colorado Lawyer (published by the Colorado Bar Association) and Nutrition Business Journal.

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