Two insurers just got off the hook for defending a Louisiana retailer sued over nitrous oxide injuries, thanks to a psychotropic substances exclusion.
On March 19, 2026, the United States District Court for the Eastern District of Louisiana granted summary judgment in favor of United Specialty Insurance Company and Century Surety Company, finding they owe no duty to defend or indemnify Tahoe Investments, LLC, which operates under the name Mr. Binkys #3, in an underlying personal injury lawsuit.
The case traces back to September 2024, when a woman named Jenna Combel filed suit in state court claiming she suffered paralysis and nerve damage from inhaling nitrous oxide she purchased from Tahoe, among other defendants, between 2019 and 2023. In her complaint, Combel described nitrous oxide inhalation as producing euphoric, dissociated, and out-of-body experiences, and alleged that the substance is commonly sold and used as a recreational drug known as whippets, poppers, or laughing gas. She sued Tahoe and twenty other alleged distributors and manufacturers.
When the insurers learned of the lawsuit, they issued a reservation of rights letter to Tahoe and agreed to provide a defense – but reserved the right to deny coverage under the psychotropic substances exclusion contained in their policies. They then filed a separate declaratory judgment action asking the court to confirm they had no obligation to defend or pay for any judgment against Tahoe.
United had insured Tahoe from March 2018 to March 2020, and Century from March 2020 to March 2024. Both sets of policies covered sums the insured becomes legally obligated to pay for bodily injury or property damage, but they also contained a specific exclusion for injuries arising out of psychotropic substances.
That exclusion is what decided the case. The policies defined a psychotropic substance as any legal or illegal drug or substance that affects the mind, mood, or other mental process, impacts the brain or central nervous system, or is hallucinogenic. The policies went a step further by listing whippets, laughing gas, and poppers as specific examples of psychotropic substances.
Judge Sarah S. Vance, applying Louisiana's Eight Corners rule – which requires a court to compare the policy language against the allegations in the complaint to determine whether coverage exists – found the exclusion applied squarely to Combel's claims. The court noted that Combel's own complaint described the mind-altering and neurological effects of nitrous oxide inhalation, which mapped directly onto the policy's definition of a psychotropic substance. The fact that the policy specifically named whippets, laughing gas, and poppers made the analysis even more straightforward.
Combel pushed back, arguing that the exclusion was ambiguous. She contended it could reasonably be read to apply only to substances whose sole purpose is to induce an altered mental state, and not to substances like nitrous oxide that also have legitimate uses, such as a whipped cream dispenser accelerant. The court was not persuaded. It pointed out that the policy uses the word "any" when defining psychotropic substances, which sweeps far broader than Combel's proposed reading. The court also noted that the policy specifically lists whippets and laughing gas – both of which are forms of nitrous oxide — as excluded substances, even though nitrous oxide has non-recreational applications. That, the court said, made it impossible to conclude the exclusion only targets substances with no legitimate use.
Combel and Tahoe also argued that the court should hold off on ruling because discovery had not been completed. Tahoe sought discovery concerning the specific nitrous oxide products Combel purchased or used and whether those products qualify as psychotropic substances under the policy definitions. Combel, meanwhile, argued she needed discovery to determine whether the insurers knew about the products Tahoe sold when the policies were issued and whether Tahoe's premium reflected a discount for the coverage gap created by the exclusion. The court rejected both arguments, treating the case as a straightforward contract interpretation question that did not require additional factual development.
Combel also argued that enforcing the exclusion would render Tahoe's coverage illusory, since Tahoe allegedly operates as a gas station, head shop, or tobacco store and the exclusion would effectively eliminate coverage for most of its products. The court found this claim unsupported by anything in the complaint and noted, in a footnote, that Tahoe itself submitted an affidavit identifying its business as an adult novelty retail store – not a gas station, head shop, or tobacco store.
With the duty to defend eliminated, the duty to indemnify fell away as well. Under Louisiana law, if an insurer has no obligation to defend, the same reasoning negates any future obligation to pay a judgment. The court granted summary judgment on both counts.
