In product liability actions, claims against manufacturers often involve bodily injury or property damage. But manufacturers can also be exposed to “personal and advertising” injuries, which don’t involve property damage but do involve financial damages that a company causes another as a result of libel, slander or defamation. “Personal and advertising” injury coverage (P&A coverage) primarily protects against these claims, and they can be coupled with exclusions like a failure-to-conform provision, which excludes claims that arise out of the failure of goods to conform with any statements regarding quality or performance.
Given the potential exposure to liability, counsel for product manufacturers should be aware of this coverage, exclusion and cases that involve them. A recent case that analyzed these issues is Westfield Insurance Company v. Robinson Outdoors, Inc., No. 11-3804 (8th Cir. Nov. 30, 2012). Here, Robinson Outdoors Inc. marketed camouflage products that, according to Robinson, would eliminate human scent so that wild game, with their acute sense of smell, would not be able to detect a hunter’s presence. Robinson then purchased two insurance policies from Westfield Insurance Company that included P&A coverage. The policies defined a “personal and advertising injury” as a publication that disparaged an organization’s products or services. The policies also included a failure-to-conform provision, which excluded claims “arising out of the failure of goods, products or services to conform with any statement of quality or performance made in [Robinson’s] advertisement.”
Despite Robinson’s claims that its products performed as advertised, many consumers believed otherwise. In 2009, they filed class action lawsuits against Robinson, alleging that the company misrepresented the attributes of its products. Robinson sought defense and indemnification from Westfield, alleging that P&A coverage applied here. But Westfield refused to defend or indemnify Robinson, contending that the failure-to-conform provision excluded the lawsuits’ claims.
The Eighth Circuit Court of Appeals agreed with Westfield. Under Minnesota law, an insurance policy provision is ambiguous when it is reasonably subject to more than one interpretation. If there is any ambiguity, the policy must be construed in favor of the insured. Despite Robinson’s protests, the court held that the exclusion was clear. The policies specifically excluded claims arising out of the failure of the goods to conform with the statement of performance made in the company’s advertising. The court believed that this exclusion directly applied to Robinson’s conduct: Robinson marketed and made statements about the performance of its goods and was then sued because the goods did not conform to promises made in the statements. Thus, the exclusion precluded coverage of the advertisements. As a result, Westfield was under no obligation to defend or indemnify Robinson in the underlying lawsuits.
The moral of this story is that in-house counsel should be fully aware of its P&A coverage and any applicable exclusions. They then should make sure that company advertisements accurately reflect their product’s capabilities. Wise counsel in these matters can save companies not only money but time and their reputations as well.