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Insurer escapes duty to defend fatal crash claim over product exclusion
A North Carolina appeals court ruled Mesa Specialty Insurance had no duty to defend because the injuries occurred away from the insured premises and arose from a product the retailer sold.
A North Carolina appeals court has allowed Mesa Underwriters Specialty Insurance Company to walk away from a fatal-crash coverage dispute, holding that a single policy exclusion barred the insurer's duty to defend the underlying suit. The decision was filed August 5, 2026 and affirmed a ruling for Mesa against Henson Novelties, Inc., which operates the Smoke Rings smoke shop chain, according to Insurance Business.
Mesa had issued a commercial policy covering a Smoke Rings store on Hillsborough Street in Raleigh, running from November 2, 2021 to November 2, 2022. The dispute stemmed from a crash on the night of January 9, 2022, where one driver allegedly hit another vehicle head-on, killing both passengers and badly injuring the driver, less than three miles from the store.
The underlying lawsuit alleged that two young men bought nitrous oxide cream chargers at the shop, inhaled the gas for intoxication, and then one of them drove into oncoming traffic. Henson passed the suit to Mesa in January 2024, and Mesa funded a defense under a reservation of rights before denying coverage and seeking a declaration that it owed nothing.
The appeals court said the policy's products-completed operations hazard exclusion controlled, based on a comparison of the policy language with the allegations. It concluded the injuries occurred away from the premises and arose out of a product Henson sold, which triggered the exclusion and eliminated the duty to defend, and because the duty to pay is narrower, also wiped out the duty to indemnify, though the court left a separate premises endorsement undecided.