Sentynl Therapeutics, Inc. v. U.S. Specialty Insurance Co, 21-55370

Sentynl Therapeutics, an opioid drug maker, received federal subpoenas (2018–2019) in an investigation into illegal profits from opioids.
Sentynl sought reimbursement under its directors, officers and organization (D&O) policy issued by U.S. Specialty for costs of complying with the subpoenas.
U.S. Specialty denied the claim based on a policy exclusion for "Loss in connection with a Claim arising out of ... any goods or products manufactured, ... sold, marketed, distributed ... by [Sentynl]."
Sentynl sued for breach of contract and breach of the implied covenant of good faith; the district court granted summary judgment for U.S. Specialty.
The Ninth Circuit reviewed de novo and affirmed, holding the subpoena-compliance costs were excluded because the subpoenas arose out of Sentynl’s opioid products.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Are subpoena-compliance costs covered despite the goods/products exclusion?	Subpoenas are investigatory, not claims "arising out of" products.	Subpoenas target companies in the opioid market and therefore arise from Sentynl’s products.	Exclusion applies; costs not covered.
How should "arising out of" be interpreted?	Ambiguous; exclusion should be narrowly construed against insurer (Partridge).	Phrase is broad and excludes risks with even a slight connection.	"Arising out of" is broad, not ambiguous; construed to mean originating from/flowing from.
Does the exclusion require a product defect or characteristic?	Exclusion should be limited to defects/characteristics of the product.	Exclusion covers broader connections, including marketing/statements about products.	Exclusion is not limited to defects; it reaches claims about what seller said/did about products.
Does the exclusion render coverage illusory?	A broad exclusion eliminates meaningful coverage.	Exclusion does not eliminate all coverage; other claim types remain covered.	No; exclusion does not render coverage illusory because it does not wipe out all policy coverage.

Trishan Air, Inc. v. Federal Ins. Co., 635 F.3d 422 (9th Cir. 2011) (standard of de novo review for summary judgment issues in insurance disputes)
Continental Cas. Co. v. City of Richmond, 763 F.2d 1076 (9th Cir. 1985) (defines "arising out of" broadly as originating from/flowing from)
Southgate Recreation & Park Dist. v. Cal. Assn. for Park & Recreation Ins., 106 Cal. App. 4th 293 (Cal. Ct. App. 2003) (California treats "arising out of" as requiring only a slight connection)
State Farm Mut. Auto. Ins. Co. v. Partridge, 514 P.2d 123 (Cal. 1973) (ambiguities in exclusions are construed narrowly against insurer)
Travelers Prop. Cas. Co. of Am. v. Actavis, Inc., 16 Cal. App. 5th 1026 (Cal. Ct. App. 2017) (goods/products exclusion can cover claims about seller representations and marketing)
Los Angeles Lakers, Inc. v. Federal Ins. Co., 869 F.3d 795 (9th Cir. 2017) (give effect to parties' intent in light of broad exclusions)
Safeco Ins. Co. of Am. v. Robert S., 28 P.3d 889 (Cal. 2001) (coverage is only illusory if an exclusion entirely eliminates coverage)
Giles v. Gen. Motors Acceptance Corp., 494 F.3d 865 (9th Cir. 2007) (standard for predicting how state high court would decide unsettled state-law issues)