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Insurer not obligated to defend in false marketing suit

Insurer not obligated to defend in false marketing suit

A federal appeals court affirmed that a sporting goods company's costs in an underlying false marketing lawsuit are excluded from personal and advertising injury coverages within its general liability policy under the failure-to-conform exclusion.

A three-judge panel of the 8th U.S. Circuit Court of Appeals in St. Louis ruled unanimously that Cannon Falls, Minn.-based Robinson Outdoors Inc. was not entitled to defense and indemnification costs under its insurance policies from its insurer, Westfield Center, Ohio-based Westfield Insurance Co.

Robinson Outdoors marketed and sold hunting-related clothing that would eliminate human scent so that wild game would not detect a hunter's presence. In 2009, the company was hit with class action lawsuits by consumers who had purchased the scent-masking products alleging that the products did not actually eliminate human odor as advertised.

A lower court determined that Robinson Outdoors' claims in the underlying lawsuits were excluded by the “failure-to-conform” provision within its advertising injury coverage, which excluded claims “arising out of the failure of goods, products or services to conform with any statement of quality or performance made in (Robinson's) policies,” according to court documents.

On appeal, Robinson Outdoors argued that the exclusion was vague. But the three-judge panel said neither the court nor Robinson Outdoors could articulate multiple interpretations of the failure-to-conform exclusion.

“Rather, the exclusion clause directly applies to Robinson's conduct — Robinson marketed goods and was then sued because the goods did not conform to promises regarding their performance,” according the opinion.

“The failure-to-conform provision in the insurance polices precludes coverage in this case because it captures all of the legal claims asserted by the consumers in the underlying lawsuits,” the Circuit Judge Bobby Shepherd wrote in the opinion filed Friday. “Therefore, the district court correctly held that Westfield was under no obligation to defend or indemnify Robinson in the underlying lawsuits.”