In its recent decision in Westfield Ins. Co. v. Robinson Outdoors, 2012 U.S. App. LEXIS 24642 (8th Cir. Nov. 30, 2012), the United States Court of Appeals for the Eighth Circuit, applying Minnesota law, had occasion to consider a “failure of goods” exclusion in the context of the advertising injury coverage part under a general liability policy.
The insured, Robinson Outdoors, manufactured and sold hunting-related products that it claimed would mask the human scent. Consumers brought several class actions against Robinson, claiming that the products did not work as advertised. Robinson’s general liability insurer, Westfield, denied coverage on the basis of its policy’s exclusion applicable to liability “arising out of the failure of goods, products or services to conform with any statement of quality or performance made in [Robinson's] 'advertisement.” Westfield was granted summary judgment by the United States District Court for the District of Minnesota, resulting in the appeal to the Eighth Circuit.
On appeal, Robinson asserted that the exclusion was ambiguous. The Eighth Circuit rejected this argument, noting that neither Robinson nor the court itself could articulate a reasonable basis as to how the failure-to-conform exclusion could be subject to more than one interpretation. As such, and because the underlying suits pertained to the alleged failure of Robinson’s products to mask the human scent as advertised, the court agreed that the exclusion unambiguously applied. In so holding, the court also rejected Robinson’s assertion that the exclusion did not apply because at least some of the advertisements identified in the complaints were not related to the products’ ability to mask human scent. The court rejected this distinction, explaining:
These allegations in the underlying lawsuits highlighted by Robinson merely provide a background to Robinson's misleading marketing tactics, not an individual or separate basis for a claim. The underlying lawsuits allege that Robinson misled consumers into buying hunting clothing that did not perform as it was advertised. The thrust of the consumers' claims was that Robinson sold hunting clothing that was advertised to eliminate human odor, but did not.