Published in Competition Law360 - November 2011.
Within the past two months, the Seventh and Eleventh Circuits have addressed whether antitrust claims against an insured gave rise to a duty to defend by insurers under commercial general liability policies that provide coverage for “personal and advertising injury.” Both Courts of Appeal arrived at the same conclusion: No. Together, these recent decisions illustrate the significant obstacles that a defendant in an antitrust lawsuit faces in seeking “advertising injury” coverage.
The case from the Eleventh Circuit, Trailer Bridge, Inc. v. Illinois Nat’l Ins. Co., No. 10-13913, 2011 U.S. App. LEXIS 19230 (11th Cir. Sept. 19, 2011), was brought by an insured that had been sued, along with various other defendants, for allegedly conspiring to fix prices for cabotage services between the mainland United States and Puerto Rico in violation of the Sherman Act. The company had a policy with its insurer that covered “personal and advertising injury,” which included “injury . . . arising out of . . . [t]he use of another’s advertising idea in your ‘advertisement.’” The plaintiffs in the underlying antitrust litigation alleged that the defendants, including the insured, made false statements about reasons for rate increases in their services, as part of an effort to fraudulently conceal their unlawful conduct. In particular, with respect to the insured, the antitrust plaintiffs asserted that its CEO had stated in an interview “that customer decisions were driven by ‘[p]rice in an all-inclusive sense, which starts with the freight rate,’ implying that Defendants could not rig bids or set and increase rates, surcharges or fees, and therefore were not doing so . . . .” In other words, this statement allegedly was meant to “lull[ ] . . . the [antitrust] class into believing that the price increases were the normal result of competitive market forces” rather than anticompetitive conduct. In seeking “advertising injury” coverage, the insured asserted that this interview of its CEO amounted to an “advertisement” within the meaning of the insurance policy. Moreover, the insured asserted that the CEO’s stated justification for price increases (i.e., market-driven pricing, as opposed to illicit conduct) had to have originated with the insured’s competitors and therefore constituted the “advertising idea” of “another.”
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