Insurer Loses Bid to Dismiss Claims in Penile Enlargement Suit

A W. R. Berkley Corp. insurance unit must litigate a dispute over who pays the legal defense costs of a medical device maker hit with a proposed class action alleging false marketing of a penile implant, a California federal judge ruled.

Admiral Insurance Co. denied coverage to James Elist, who developed a surgical procedure to implant the device named Penuma, and his medical companies, which manufactured and sold the device, in the proposed class action over false advertising and deceptive practices. Elist and his companies sued Admiral and another insurer after they denied coverage, and Admiral moved to dismiss the case.

But the US District Court for the Central District of California denied the motion in a ruling Wednesday.

“The court is unable, at least at this stage of the proceedings, to conclude that there are no potentially covered claims asserted in” the underlying lawsuit, District Judge Percy Anderson said.

Admiral argued the claims in the underlying lawsuit focused on advertising and statements on the companies’ websites, which don’t fall under provisions in the insurance policy covering malpractice claims. But Anderson said he couldn’t verify that argument since the underlying suit also included claims that Elist and his staff failed to inform patients directly that the device wasn’t cleared by the Food and Drug Administration to work as a penis enlarger.

Admiral also argued the damages sought in the proposed class action aren’t covered by the policy, but Anderson ruled the breach of contract claim didn’t seek damages, declining to dismiss the case on that basis.

Anderson also said he was unable to resolve a dispute over whether the insurer had to cover Elist Medical, one of Elist’s companies. Admiral contended it issued the insurance policy to Elist personally, not the company.

The underlying class action is stayed pending an appeal to the US Court of Appeals for the Ninth Circuit over the district court’s denial of compelled arbitration.

Admiral declined to comment. Elist couldn’t immediately be reached for comment.

Duane Morris LLP represents Admiral. Pasich LLP represents James Elist; International Medical Devices Inc.; Menova International Inc.; and James J. Elist, M.D., A Medical Corporation.

The case is International Medical Devices, Inc. et al v. James River Insurance Company et al, C.D. Cal., Docket No. 2:24-cv-01915, 7/10/24.