Thursday, April 13, 2017

Ordinary false advertising isn't disparagement for insurance purposes

Vitamin Health, Inc. v. Hartford Casualty Ins. Co., --- Fed.Appx. ----, 2017 WL 1325263, No. 16-1724
 (6th Cir. Apr. 11, 2017)

Vitamin Health makes products intended to reduce the risk of developing age-related macular degeneration, advertising that its products contain the combination of vitamins recommended by the second Age-Related Eye Disease Study, a 2013 study conducted by the National Eye Institute for the National Institutes of Health.  Bausch & Lomb, a competitor, sued Vitamin Health for patent infringement and false advertising, alleging that that Vitamin Health’s product contained less zinc than what the AREDS 2 study recommended.  Because of the false advertising claim, Vitamin Health asked its insurer Hartford to defend it, and Hartford declined.  Here, the court upholds the district court’s finding that Hartford had no duty to defend.

Vitamin Health argued that the false advertising claim fell within the policy’s definition of “personal and advertising injury,” which covers, among other things, “Oral, written or electronic publication of material that slanders or libels a person or organization or disparages a person’s or organization’s goods, products or services.”  Vitamin Health argues that allegedly disparaged Bausch & Lomb by implication. But there can be no disparagement when the alleged misrepresentation was of the policy holder’s own product. Under Michigan law, “a disparagement claim requires a company to make false, derogatory, or disparaging communications about a competitor’s product.”  

Vitamin Health argued a theory of “implied disparagement,” which allegedly existed whenever one company claims its products are superior to all other products. But it wasn’t clear that Michigan law recognizes claims of disparagement by implication, and even if it did, Vitamin Health didn’t make claims about its own superiority; Bausch & Lomb was the one that claimed that its product was the only one that complied with the AREDS 2 formula.

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