A Colorado federal court relieved the Travelers Indemnity Company of America and Travelers Property Casualty Company of America of any obligation to defend or indemnify two putative class actions, finding neither action implicated the insuring agreement for “personal and advertising injury” contained in several Travelers commercial liability policies.
The Underlying Actions
Two underlying class actions were filed in Washington federal court against various coffee sellers, including Boyer’s Coffee Co. The first suit was filed by farmers of “Kona” coffee authentically grown in the Kona district of Hawaii. The second suit was filed by consumers of coffee products sold by Boyer’s and others, which displayed the word “Kona” on the label.
In both class actions, the plaintiffs took issue with the defendants’ use of the word “Kona” on their products, alleging that only coffee grown on farms in Hawaii’s Kona district can be truthfully marketed, labeled, and sold as “Kona” coffee. The farmer action alleged more specifically that Boyer’s wrongfully profited from the goodwill and reputation of authentic Kona coffee by, among other things, falsely designating “Kona” as the origin of their products and using deceptive marketing and packaging to that end. In the consumer action, the plaintiffs similarly alleged that Boyer’s falsely labeled and advertised its coffee as originating from “Kona,” including labeling one product “Café Kona” and labeling another product “Kona Blend,” with the intent to deceive consumers.
The Coverage Dispute
Boyer’s tendered the class actions under several commercial and umbrella liability policies issued by Travelers to Boyers’ parent company. Boyer’s claimed the actions implicated the commercial general liability insuring agreement for “personal injury” and/or “advertising injury.” Travelers disagreed and filed suit seeking a declaration that it had no duty to defend or indemnify Boyer’s in connection with the two actions.
Given Colorado’s general rule that an insurer with no duty to defend likewise has no duty to indemnify, the threshold and outcome-determinative issue was whether Travelers had to defend Boyer’s in either of the class actions. Colorado applies the “complaint rule,” which states that an insurer must defend so long as the underlying complaint alleges any facts that might fall within the scope of coverage. On its motion for summary judgment, Travelers argued the class actions did not, as neither involved damages because of “personal injury” or “advertising injury,” as defined. Naturally, Boyer’s disagreed, and the court proceeded to analyze whether any allegations in the class actions could be read as conceivably constituting “personal injury” or “advertising injury.”
One category of offenses covered under the policies was conduct resulting in disparagement of the underlying claimant’s goods or products. Specifically, to constitute “advertising injury,” the Kona plaintiffs must have alleged that (a) Boyer’s published material in its “advertisement” and (b) the material disparaged their goods or products. To constitute “personal injury,” the complaints must have similarly alleged that Boyer’s published disparaging material about the Kona plaintiffs’ goods or products.
At the outset, the court agreed with Boyer’s that certain allegations in the class actions at least arguably involved conduct falling within the definition of an “advertisement.” From there, Boyer’s was less successful. As it relates to both the “advertising injury” and “personal injury” coverages, Boyer’s claimed there were allegations in the farmer action that Boyer’s impliedly disparaged the farmer plaintiffs’ products. The theory, according to Boyer’s, was that it allegedly stated falsely that its products contain Kona coffee, which, in turn, disparaged coffee made in the Kona district, which, in turn, disparaged the farmers’ products. The court was unconvinced, finding the use of the word “Kona” on Boyers’ packaging and/or advertisement did not disparage the Kona farmers, whether based on the dictionary definition of the word or the elements of the tort of disparagement. For this reason, the court found the “implied disparagement” theory too remote to trigger a duty to defend the farmer action under the Travelers policies. Coverage under the policies also required that any alleged disparagement be directed at the claimants’ goods or products. Since the plaintiffs in the consumer action did not sell Kona coffee, the court found Travelers had no obligation to defend the consumer action on the basis of alleged disparagement.
The court also considered whether the farmer action alleged that Boyer’s infringed a “slogan” in the Kona farmers’ “advertisement,” so as to constitute “advertising injury” on this alternative basis. Pointing to the “priceless” slogan used by Mastercard, the court rejected Travelers’ argument that a slogan, or “phrase,” cannot consist of a single word (e.g., “Kona”). Nonetheless, the court agreed with Travelers’ larger points – that Boyer’s was not using “Kona,” “Kona Blend,” or “Café Kona” as a slogan and that none of these phrases were infringing. Indeed, the court emphasized that the Kona farmers only took issue with Boyer’s use of the word “Kona” in “Kona Blend” and “Café Kona”; they did not complain about the phrases themselves. Because the words were being used solely to describe Boyers’ products, the court found the farmer action did not implicate Travelers’ duty to defend or indemnify on this basis either.