73 F.4th 934
11th Cir.2023Background
- Winder Laboratories purchased a primary liability policy from Valley Forge and an umbrella policy from Continental; both covered "personal and advertising injury" (including use of another's advertising idea) but excluded injuries "arising out of the failure of goods, products or services to conform" with advertised quality/performance (the "failure to conform" exclusion).
- Concordia sued Winder and its manager under the Lanham Act and Georgia law alleging false and misleading advertising—principally that Winder misrepresented its products as generics comparable to Concordia’s DONNATAL; the operative Fourth Amended Complaint emphasized those misrepresentations (label-copying allegations were present in the factual section but not central to the contributory-false-advertising count).
- Insurers agreed to defend under reservation of rights; their reservation letters included an asserted right to seek reimbursement of defense costs—though neither policy contained a reimbursement clause.
- Insurers filed a declaratory-judgment action seeking a ruling that they had no duty to defend/indemnify and that they could recoup defense costs; the district court granted judgment on the pleadings that the failure-to-conform exclusion precluded a duty to defend and later granted summary judgment to the insureds denying insurer reimbursement.
- On appeal/cross-appeal, the Eleventh Circuit affirmed both holdings: (1) the failure-to-conform exclusion applied to the Fourth Amended Complaint, extinguishing the duty to defend; and (2) insurers could not recoup defense costs based on reservation letters because no new contract arose, unjust enrichment failed, and Georgia law would not recognize a recoupment right absent contract.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Duty to defend (whether Concordia alleged a covered "personal and advertising injury") | Insureds: Complaint included label-copying allegations that trigger coverage for "use of another’s advertising idea." | Insurers: Underlying claim rests on affirmative misrepresentations that fall within the policy's "failure to conform" exclusion, so no duty to defend. | Court: Held the contributory false-advertising claim focused on misrepresentations and fell within the failure-to-conform exclusion; no duty to defend the Fourth Amended Complaint (duty ended when district court ruled). |
| Right to reimbursement of defense costs (can insurer recoup costs based on reservation letters absent contractual right?) | Insurers: Reservation letters (signed/accepted) created or implied a contract or support unjust-enrichment recovery permitting recoupment. | Insureds: Reservation cannot unilaterally add recoupment to a policy; no consideration for a new contract and unjust enrichment fails. | Court: Held reservation did not create a new contract (no new consideration), unjust enrichment claim fails, and Georgia would not allow recoupment based only on reservation letters—no reimbursement. |
Key Cases Cited
- Pilz v. Monticello Ins. Co., 599 S.E.2d 220 (Ga. Ct. App. 2004) (duty-to-defend determined by comparing complaint allegations to policy).
- City of Atlanta v. St. Paul Fire & Marine Ins. Co., 498 S.E.2d 782 (Ga. Ct. App. 1998) (if complaint arguably alleges covered claims, insurer must defend).
- Penn-Am. Ins. Co. v. Disabled Am. Veterans, Inc., 490 S.E.2d 374 (Ga. 1997) (broad duty to defend may exist even where indemnity is not owed).
- Glisson v. Global Sec. Servs., LLC, 653 S.E.2d 85 (Ga. Ct. App. 2007) (a promise to perform a preexisting contractual duty is not consideration for a new contract).
- Estée Lauder Cos. v. Duty Free Ams., Inc., 797 F.3d 1248 (11th Cir. 2015) (elements for contributory false advertising under Lanham Act).
- Am. & Foreign Ins. Co. v. Jerry’s Sport Ctr., Inc., 2 A.3d 526 (Pa. 2010) (refusing insurer recoupment to avoid eroding the broad duty to defend).