794 F.Supp.3d 773
D. Haw.2025Background
- Retailer MNS (doing business as ABC Stores) was sued in the "Corker" class action for selling coffee labeled as "Kona" that allegedly contained little or no real Kona coffee, harming the market for genuine Kona coffee.
- The Corker plaintiffs alleged violations of the Lanham Act (false advertising, designation of origin, and unfair competition) and claimed that MNS collaborated in the marketing scheme.
- MNS settled the case for $12 million, with $1 million covered by its primary insurer Mitsui and sought the remaining $11 million from its umbrella insurer, Allied World.
- Allied World denied coverage and filed this declaratory judgment action in Hawaii federal district court, arguing that its policy exclusions fully barred coverage.
- The case comes before the court on cross-motions for summary judgment, focusing on coverage and applicability of policy exclusions under Hawaii law.
- The court ultimately granted Allied World’s motion for summary judgment, finding that the "failure-to-conform" exclusion applied and barred coverage entirely.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does Allied World's policy cover MNS’s settlement liability? | Coverage for “advertising injury” applies | No covered advertising injury; settlement covered non-claims | Policy applies to advertising-related settlement liability |
| Is “Kona” labeling the use of another's advertising idea? | "Kona" is an advertising idea used by others | Must be a proprietary/process-based advertising idea | "Kona" is an advertising idea used by another and thus within coverage |
| Does exclusion for failure to conform apply? | Exclusion does not apply; “Kona” is source not quality | Alleged statement concerned origin, not quality | Exclusion for failure-to-conform to quality statements fully bars coverage |
| Must insurer cover a reasonable settlement of potential claims? | Yes, if settlement is reasonable and resolves covered risks | Must be actual liability or allocation only to covered claims | Covered if settlement resolves legitimate risk of liability on covered claims |
Key Cases Cited
- Dairy Rd. Partners v. Island Ins. Co., 92 Hawai‘i 398 (Haw. 2000) (insurance policies construed in favor of insured; ambiguities resolved against insurer)
- Aloha Petroleum, Ltd. v. Nat’l Union Fire Ins. Co. of Pittsburgh, 155 Hawai‘i 108 (Haw. 2024) (exclusionary policy clauses are interpreted narrowly against insurers)
- Sturla, Inc. v. Fireman’s Fund Ins. Co., 67 Haw. 203 (Haw. 1984) (policies construed to meet reasonable expectations of laypersons)
- Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (1986) (summary judgment standard: no genuine dispute of material fact)