Sixth Circuit Finds No “Advertising Injury” Coverage for Suit Alleging False AdvertisingMay 15, 2017
The U.S. Court of Appeals for the Sixth Circuit has ruled that an insurance company was not obligated to defend its insured against a claim that its advertisements had falsely described the insured’s own products where the claim did not allege that the insured had disparaged the competitor’s products.
Vitamin Health, Inc. manufactures products intended to reduce the risk of developing age-related macular degeneration. Its advertisements state that its products are AREDS 2-compliant, meaning that they contain ingredients recommended by the National Eye Institute.
Bausch & Lomb sued Vitamin Health for false advertising, alleging that a product Vitamin Health advertised as “AREDS 2-compliant” had less zinc than what the AREDS 2 study recommended. Bausch & Lomb alleged that because it marketed and sold a competing product, Vitamin Health’s false advertising had caused it harm.
Vitamin Health tendered defense of the Bausch & Lomb action to its insurer, contending that the false advertising claim fell within the policy’s definition of “personal and advertising injury” because it alleged that Vitamin Health’s advertising had “disparaged” Bausch & Lomb’s products.
The insurer disagreed and denied a defense. Vitamin Health then sought a declaration from the U.S. District Court for the Eastern District of Michigan that it was entitled to defense and indemnity for the Bausch & Lomb lawsuit.
The court granted summary judgment in favor of the insurer, and Vitamin Health appealed to the Sixth Circuit.
The Sixth Circuit’s Decision
The circuit court affirmed.
In its decision, the circuit court first found that Bausch & Lomb’s complaint did not allege that Vitamin Health had disparaged Bausch & Lomb’s product within the meaning of the policy’s “personal and advertising injury” provisions because it alleged only the “knowing and willful false and misleading labeling” of Vitamin Health’s own product.
The Sixth Circuit also rejected Vitamin Health’s argument that it was entitled to coverage because Bausch & Lomb’s complaint asserted a theory of “implied disparagement” when it contended that Vitamin Health had claimed that its products were superior to all other products. The circuit court found that the Bausch & Lomb complaint did not assert that Vitamin Health had made claims about the superiority of its own product, and there was no “implication of such an allegation.” Rather, the circuit court noted, Vitamin Health had argued that it was Bausch & Lomb that advertised its products as superior to its competitors.
The Sixth Circuit concluded that the gravamen of Bausch & Lomb’s claim against Vitamin Health was for false advertising, not product disparagement. The insurance policy did not cover false advertising claims, so the insurer had no duty to defend or indemnify Vitamin Health on this claim.
The case is Vitamin Health, Inc. v. Hartford Cas. Ins. Co., No. 16-1724 (6th Cir. Apr. 11, 2017).