consumer claims aren't covered by advertising injury policy

National Union Fire Ins. Co. of Pittsburgh, Pa. v. Mead Johnson & Co., 913 F. Supp. 2d 682 (S.D. Ind. 2012)

National Union successfully sought a declaration that it had no duty to defend Mead Johnson in the follow-on consumer lawsuits stemming from the PBM v. Mead Johnson infant formula §43(a)(1)(B) false advertising litigation, where Mead Johnson was found to have falsely claimed a unique formulation unavailable in less expensive store brands.  The consumer plaintiffs based their claims on the same comparative advertising.  National Union argued that this wasn’t covered “personal and advertising injury.”

Under Indiana law, a duty to defend is triggered when the underlying complaint alleges facts that might fall within the coverage of the policy (or, when the facts are contested, the insurer must undertake a reasonable investigation into the underlying facts).  The relevant question was whether the underlying lawsuit alleged “[o]ral or written publication ... that slanders or libels a person or organization or ... disparages a person's or organization's goods, products, or services.”  Mead Johnson argued that the underlying complaints alleged that consumers suffered injury arising out of Mead Johnson’s disparagement of competitors’ lower-priced formula, e.g., “As part of its deceptive marketing campaign, Mead Johnson has disparaged competing products, particularly store brands....”

The court found this insufficient; to state a claim for libel, slander, or disparagement, the underlying plaintiffs would have to allege that the false statements were made about the plaintiffs.  Consumers wouldn’t have Article III standing to bring claims for disparagement of the competition, and their injuries were purely economic.  Since the statements at issue weren’t “of and concerning” the underlying plaintiffs, there was no coverage, and any economic injury they suffered didn’t fall within the scope of “disparagement.”  (I don’t really get this.  The policy by its terms doesn’t say that the “person” who is disparaged has to be the one who’s suing to trigger coverage; it just says that the injury has to arise out of disparagement, and the underlying plaintiffs here alleged that Mead Johnson’s denigration of competing brands caused them to pay more for Mead Johnson’s version.) 

No duty to defend and no duty to indemnify.