How often do you take the time to read, and more importantly to understand, all of the terms of your liability insurance policy? Do you understand your obligations as well as the obligations of the insurance company who issued the policy? The case of R.C. Bigelow, Inc. v. Liberty Mutual Insurance Company, 287 F.3d 242 (2nd Cir. 2002) illustrates the importance of understanding all of the terms of a liability insurance policy in the tea industry.
The R.C. Bigelow, Inc. v. Liberty Mutual Insurance Company case addressed whether the “advertising injury” provision of a liability insurance policy obligates the issuing insurance company to defend its insured’s published advertisements. In 1995, Celestial Seasonings, Inc. filed a lawsuit against Bigelow for claims surrounding Bigelow’s tea advertisements. Celestial Seasonings claimed that Bigelow’s tea packaging was confusingly similar to Celestial Seasonings’ packaging and that Bigelow failed to indicate that its teas were “artificially flavored,” thus misappropriating the public’s trust. Bigelow, in compliance with its liability insurance, provided Liberty Mutual Insurance Company with all the pleadings and requested the insurance company defend Bigelow in the suit. Liberty Mutual, however, denied Bigelow coverage claiming Bigelow’s suit with Celestial Seasoning was outside the “advertising injury” as defined in the liability insurance policy.
Without the financial support of Liberty Mutual, Bigelow was forced carry the costs for defending itself in the lawsuit with Celestial Seasonings. While costly, Bigelow’s defense was ultimately successful when the District Court in Colorado entered judgment in favor of Bigelow on all counts.
While thankful for the victory, Bigelow was saddled with all of the costs and attorneys’ fees associated with the Celestial Seasonings suit. In turn, Bigelow filed a lawsuit against Liberty Mutual alleging that advertisements at issue in the Celestial Seasoning case were encompassed in the “advertising injury” provision of its liability policy; accordingly, Liberty Mutual should have indemnified and defended Bigelow.
In determining whether the “advertising injury” provision of the insurance policy was triggered by the Celestial Seasonings suit, the court looked to Connecticut law to determine the meaning of the “advertising injury” clause. Connecticut law, like most states, provides that the interpretation of an insurance policy involves the determination of: 1) the intent of the parties as expressed by the language used in the policy; 2) the coverage the insured (Bigelow) expected; and 3) the natural and ordinary meaning of the words used. Finally, the law advises that any ambiguity related to a term(s)’s meaning should be resolved in favor of the insured (Bigelow) since the insurance company is the party that drafted the policy. Finding that the advertisements in question materially contributed to the injuries claimed by Celestial Seasonings and that the advertisements at issue would qualify as an “advertising injury” if the words were ascribed their “natural and ordinary meaning,” the court held that Liberty Mutual was responsible for the costs in defending the Celestial Seasoning case.
LegalTEAS Lesson: This case should be a catalyst for you to review all of your insurance policies and understand the mutual responsibilities described. Your failure to execute the obligations assigned to you may relieve the insurance company from its obligations.
An “advertising injury” in the context of liability insurance is often defined as “coverage for legal liability arising out of your oral or written publication of material causing ‘economic damage’ or ‘personal injury’ to a third party.”
1) Does your liability insurance cover possible slander and libel suits?
2) Where permitted by your state’s laws, does the policy cover punitive damages?
3) Is your coverage for advertisements based on an occurrence basis (covering advertisements published during the policy period regardless of when a claim is filed) or a claims basis (covering advertisements made during the policy period)?
4) Is coverage for ancillary promotions, such as publicity materials, included?
5) Do you additional insurance for coverage in cyberspace (known as “Cyber Liability”) or for error and omissions related to advertisements?
6) Does the policy provide for cooperation between your company and the insurance company in determining when a retraction is necessary?
[1] As defined in “Facing the Risk – Liability Insurance Checklist” by Kenneth A. Hall of Robertson Hall Insurance.
