"unfair trade practices" insurance exclusion covers antitrust, not consumer protection

G-New, Inc. DBA Godiva Chocolatier, Inc. v. Endurance Am. Ins. Co., C.A. No. N21C-10-100 MMJ CCLD, 2022 WL 4128608 (Del. Super. Ct. Sept. 12, 2022)

An insurance coverage case about a false advertising claim that doesn’t turn on “advertising injury”! Godiva had insurance from defendants when it was accused of misleading consumers with the “Belgium 1926” label on its products. The settlement, still pending final approval, in the underlying case obligated Godiva to pay: (i) a maximum of $15 million in monetary relief; (ii) a maximum of $5 million in attorneys’ fees; (iii) all settlement notice and administration costs; and (iv) up to $10,000 in class representative service awards. The insurers refused Godiva’s demand to cover the claim.

Other matters appear, but of most relevance: an exclusion for civil money penalties imposed for “knowing or willful” conduct did not apply in the absence of “evidence or admission that the violation of law was knowing or willful.” “[T]he Settlement Agreement is a covered loss within the meaning of the term ‘Loss’ as explicitly defined to include settlements in the Policy.”

There was also an exclusion covering claims “based upon, arising out of or attributable to an actual or alleged violation of the Sherman Anti-Trust Act, the Clayton Act or the Federal Trade Commission Act, as amended, or any other federal, state, local, common or foreign laws involving anti-trust, monopoly, price fixing, price discrimination, predatory pricing, restraint of trade, unfair trade practices or tortious interference with another’s actual or prospective business or contractual relationships or opportunities.”

Did the undefined term “unfair trade practices” include consumer protection and false advertising? No. “Generally, consumer protection involves violations of statutes, regulations, and common law standards. The Endurance Policy does not explicitly exclude consumer protection actions from coverage.” Other than the ambiguous term “unfair trade practices,” the rest of the terms in the exclusion were antitrust-based. “The Court questions whether unfair trade practices are the equivalent of consumer fraud. Defendant insurers have presented no authority demonstrating that these terms are interchangeable or legally equivalent.” Nor did the settlement specifically say that it provided monetary relief for “unfair trade practices,” though it was possible that some of the settlement could be covered.

A similar result occurred with an exclusion for “fines or penalties imposed by law, other than civil money penalties expressly referenced in the definition of Loss above....” Godiva argued that the settlement amount constituted restitution for the alleged price premium paid for Belgian chocolate, not a penalty; the court again found that at least some of the settlement could be covered.