Property Casualty Focus

On June 1, 2023, the Sixth Circuit Court of Appeals found that a Lanham Act false advertising lawsuit was not covered under the “personal and advertising injury” coverage section of a commercial general liability (CGL) policy under Michigan law.

The plaintiff in L&K Coffee LLC v. LM Insurance Corp. is a Michigan-based company that roasts and sells coffee products throughout the United States. In early 2019, coffee growers from the Kona region of Hawaii sued L&K under the Lanham Act, alleging that L&K falsely advertised its products as “Kona” coffee when most of its products were allegedly sourced from other parts of the world. According to the coffee growers, L&K was damaging the growers’ reputation by passing off its inferior product as authentic Kona-sourced coffee.

L&K made a claim for coverage of the lawsuit under the personal and advertising injury coverage section of its CGL policy, which defined “personal and advertising injury,” in relevant part, as either (1) a publication that disparages a person's or organization’s goods, products, or services, or (2) infringing upon another’s slogan. L&K’s insurers denied coverage for the lawsuit on several grounds, including that the lawsuit did not fall under either prong of the policy’s definition of personal and advertising injury. In the ensuing coverage litigation, the district court agreed with the insurers that the underlying suit did not seek damages for a personal and advertising injury as defined in the CGL policy and granted summary judgment in favor of the insurers.

On appeal, the Sixth Circuit noted that while the CGL policy defines personal and advertising injury by reference to either “disparagement” or “slogan infringement,” neither of those terms was defined in the policy. The court thus considered the plain and ordinary meaning of each term and whether the underlying suit met the requirements of either. Regarding “disparagement” liability, the court found that under Michigan law, a disparagement claim requires a company to make false, derogatory, or disparaging communications about a competitor's product. The court noted that the underlying suit did not allege disparagement of the underlying plaintiffs’ products per se but rather that L&K’s advertising had a negative economic effect on its product. The court concluded that this was insufficient to meet the disparagement prong of the policy’s personal and advertising injury definition.

Regarding the slogan infringement prong, the court found the plain and ordinary meaning of the term “slogan” to be a “distinctive cry, phrase, or motto of any party, group, manufacturer, or person; catchword or catch phrase.” Noting that the underlying plaintiffs had no claim of ownership over the phrase “Kona coffee” and that L&K could point to no allegations indicating that rights to any other slogan may have been infringed, the court similarly found that the underlying suit did not fall under the slogan infringement prong of the policy’s personal and advertising injury prong. The Sixth Circuit affirmed the district court’s grant of summary judgment in favor of the insurers accordingly.