Rose Acre Farms, Inc. v. Columbia Cas. Co. (7th Cir. (Ind.) Nov. 1, 2011)
The Seventh Circuit ruled last week that an insured was not entitled to defense or indemnity from its liability insurers in several class action lawsuits claiming that the insured conspired to fix the price of eggs.
The insured, the nation’s second largest egg producer, was charged in a number of class action suits with violations of the Sherman Act. The underlying complaints alleged that as a member of United Egg Producers, Inc. (“UEP”), the insured participated in and profited from UEP’s efforts to reduce supply and fix prices. The insured claimed that the allegations amounted to “personal and advertising injury” within the meaning of the policy.
The insurance policies defined “personal and advertising injury” as “injury…arising out of one or more of the following offenses,” including “the use of another’s advertising idea in your ‘advertisement.’” The insured argued that it advertises its compliance with UEP guidelines on its website, where it also advertises that it sells eggs produced by not only caged chickens, but also “free-roaming” chickens. The insured’s website states that eggs produced by “free-roaming” chickens cost more than regular eggs because “free-roaming” chickens have access to fresh water, fresh air, and fresh feed, and are given space to move about and socialize with other chickens. The website also notes that eggs produced by “free-roaming” chickens must be gathered by hand, which also increases their cost. The insured argued that because its statements about the cost of eggs produced by “free-roaming” chickens could be thought to be intended to deceive consumers about the insured’s alleged price fixing, the allegations constituted a “personal and advertising injury” within the meaning of the policy.
The district court disagreed with the insured’s position and the Seventh Circuit affirmed. In so ruling, the Seventh Circuit noted that the underlying complaints did not even mention the insured’s website nor did they even pertain to the price of eggs produced by “free-roaming” chickens. Rather, the underlying complaints complained only about the insured’s conspiring to fix the price of eggs from caged chickens. The Seventh Circuit also noted that even if the underlying complaints alleged “personal and advertising injury,” coverage would be barred by the policies’ exclusions for “advertising injury” that is “caused by or at the direction of the insured with the knowledge that the act [triggering liability] would violate the rights of another” or that “aris[es] out of a criminal act committed by or at the direction of any insured.”
For a copy of the decision, click here
Carrie Appler and Colleen Murphy