186 F. Supp. 3d 712
E.D. Mich.2016Background
- Vitamin Health (insured) was sued by Bausch & Lomb in an underlying suit alleging patent infringement and, in an amended complaint, a Lanham Act false-advertising claim based on Vitamin Health’s labeling of its own AREDS2 dietary supplement.
- Vitamin Health tendered defense and indemnity under Hartford policies (Dec. 27, 2012–Dec. 27, 2014), asserting the Lanham Act claim is a “personal and advertising injury” covered by the policies.
- Hartford denied coverage and filed a declaratory-counterclaim that it has no duty to defend or indemnify. Vitamin Health sued for declaratory relief and breach of contract.
- The policies’ insuring agreement covers personal and advertising injury including publication that “disparages a person’s or organization’s goods.”
- Policies contain two relevant exclusions: an intellectual-property exclusion removing coverage for advertising injury alleged in any suit that also asserts IP claims, and a “failure to conform” exclusion for injury arising from goods not conforming to advertised quality or performance.
- Cross-motions for summary judgment: Hartford argued (1) the Lanham Act claim alleges misrepresentation about Vitamin Health’s own product (not disparagement of Bausch’s product) and (2) the IP and failure-to-conform exclusions bar coverage. Vitamin Health argued the claim arguably pleads disparagement by implication and exclusions do not apply.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the underlying Lanham Act false-advertising claim is an arguable "personal and advertising injury" (product disparagement) | Vitamin Health: the complaint arguably pleads implicit disparagement of Bausch’s products (false comparison/implied inferiority), triggering duty to defend | Hartford: complaint alleges misrepresentations about Vitamin Health’s own product content, not statements about or disparagement of Bausch’s product; no arguable disparagement | Court: No duty to defend — the underlying claim alleges misrepresentation of insured’s own product, not disparagement of competitor’s product; coverage not triggered |
| Whether the intellectual-property exclusion bars coverage | Vitamin Health: exclusion language should not be read to bar advertising claims here; the policy grant and defined phrase "personal and advertising injury" should not be superseded by broad wording | Hartford: endorsement subsection (7)(b) unambiguously excludes any advertising injury asserted in a suit that also alleges IP claims (the amended complaint includes patent counts) | Court: Held exclusion (7)(b) is clear and unambiguous; it bars coverage because the false-advertising claim is in the same suit as patent infringement |
| Whether the "failure to conform" exclusion applies | Vitamin Health: argues exclusions do not negate coverage (contested generally) | Hartford: the Lanham claim alleges Vitamin Health falsely labeled its own product as AREDS2-compliant — a statement of quality/performance that the product allegedly fails to meet | Court: Held exclusion bars coverage because the claim arises from insured’s alleged failure of its goods to conform to advertised quality |
| Duty to indemnify given no duty to defend | Vitamin Health: seeks indemnity if covered | Hartford: no duty to indemnify where no duty to defend | Court: Held no duty to indemnify because there is no duty to defend; indemnity narrower than defense |
Key Cases Cited
- Celotex Corp. v. Catrett, 477 U.S. 317 (summary-judgment standard)
- Anderson v. Liberty Lobby, 477 U.S. 242 (summary-judgment standard re: nonmoving party burden)
- Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574 (view evidence in light most favorable to nonmoving party)
- Auto-Owners Ins. Co. v. Churchman, 440 Mich. 560 (insurance-policy interpretation; give meaning to all terms)
- Travelers Prop. Cas. Co. of Am. v. Peaker Servs., Inc., 306 Mich.App. 178 (two-step insurance analysis: coverage then exclusions)
- Citizens Ins. Co. v. Secura Ins., 279 Mich.App. 69 (duty to defend depends on underlying complaint allegations)
- E.piphany, Inc. v. St. Paul Fire & Marine Ins. Co., 590 F. Supp. 2d 1244 (disparagement by clear implication — contrasted by court)
- Jar Laboratories, LLC v. Great American E&S Ins. Co., 945 F. Supp. 2d 937 (distinguishing false statements about competitor’s product vs. misrepresentations about one’s own product)