Insurer can tell insured to buzz off

Harleysville Mutual Ins. Co. v. Buzz Off Insect Shield, L.L.C., --- S.E.2d ----, 2010 WL 1492136 (N.C.)

S.C. Johnson & Son (SCJ) sued Buzz Off and International Garment Technologies (IGT) alleging false advertising of the attributes of their insect-repelling clothing. The parties here were fighting over whether IGT’s commercial general liability insurance carriers were required to defend it against SCJ’s claims. The policies cover injuries resulting from some false statements in ads, but exclude from covered “advertising injury” the failure of the insured’s goods to conform to statements about quality or performance. The question was whether SCJ alleged injury resulting solely from Buzz Off and IGT’s allegedly false statements about their own products, or also injury from false statements about SCJ’s products. Because SCJ only alleged the former, the failure to conform exclusion applied. There was no duty to defend.

The court rejected the argument that the failure to conform exclusion was there to prevent consumers from bringing products liability actions veiled as false advertising claims and shouldn’t apply to competitor false advertising claims. There is a difference, IGT argued, between being injured by a product’s failure to perform as advertised and being injured by the ad; SCJ’s alleged injury was the latter. And it’s true that SCJ’s injury (lost sales and profits) would have occurred whether or not the ads were true. But SCJ can only recover damages if the ad is false, and the policies here only cover “offenses.” IGT’s argument didn’t create any ambiguity in the policy provision, and thus the court applied it as written.

So the only question was the nature of SCJ’s claims. SCJ identified many offensive statements in its complaint, many of which repeated the claim that insect repellents (such as SCJ’s OFF!) are messy and require frequent reapplication (thus making Buzz Off and IGT’s clothing comparatively advantageous); others mentioned “chemicals” in spray repellents, implying that topical repellents were less safe than Buzz Off’s clothing. Still, the North Carolina Supreme Court concluded, the essential allegation of the complaint was that Buzz Off’s statements about its own products—that they offered protection from insects--were false.

The court found “support” for the argument that these allegations involved false statements about SCJ’s products. Still, SCJ was attacking allegedly false superiority/equivalence claims, which if false are false because of the failure of Buzz Off’s products to perform as claimed. As for the messy/nasty/unappetizing/greasy descriptions of topical repellents, SCJ never contended that these were false descriptions. And, given their subjectivity, the court questioned whether they were actionable statements of fact. (Surely that last bit can’t be enough to get rid of the duty to defend, though.) Finally, though SCJ alleged that defendants made false statements indicating that their insect repellent was naturally derived, that doesn’t equate to a characterization of topical repellents as unsafe. SCJ’s claim was clearly that defendants’ repellent was in fact synthetic, not natural. Again, that’s failure to conform.