Courts Rebuff Policyholders Who Seek Defense of Antitrust Class Actions

Recently-filed lawsuits in California and Georgia follow a trend of CGL policyholders demanding defenses to antitrust conspiracy claims under the theory that the antitrust class actions seek damages for “personal and advertising injury.” The same playbook, however, has not succeeded for policyholders in the Seventh and Eleventh Circuits. Thus, what might have seemed like a colorable claim now looks more like a hail mary pass.

The United States Court of Appeals for the Seventh Circuit recently joined the Eleventh Circuit in holding that class action lawsuits for price-fixing conspiracies do not fall within CGL coverage for advertising injury. The Seventh Circuit decided the issue in Rose Acre Farms, Inc. v. Columbia Casualty Co. and National Fire Ins. Co. of Hartford, No. 11-1599 (November 1, 2011).

The policyholder, Rose Acre, faced consolidated class actions in Pennsylvania alleging Rose Acre had engaged in a conspiracy to fix the price of eggs in violation of Section 1 of the Sherman Act. Rose Acre tendered its defense to its insurers and argued that the lawsuits sought damages for “personal and advertising injury” within the scope of the CGL policies. The insurers declined to defend Rose Acre, and Rose Acre then sued the carriers in the United States District Court for the Southern District of Indiana.

Chief Judge Posner, writing for the unanimous panel, made quick work of Rose Acre’s arguments. The Court reasoned that the class actions complained only about illegal price-fixing, not Rose Acre’s advertising. In addition, there is the rather inconvenient obstacle for Rose Acre that price-fixing is an intentional criminal act for which a clear policy exclusion applies.

As the Seventh Circuit noted, the Eleventh Circuit Court of Appeals reached the same result in a case decided just a month earlier, Trailer Bridge, Inc v. Illinois National Ins. Co., 657 F.3d 1135 (Sept. 19 2011). The Trailer Bridge and Rose Acre decisions, however, have not stopped the continuing trend in which policyholders accused of antitrust conspiracies seek defenses under CGL policies.

The Georgia case is Collegiate Licensing Co. v. American Casualty Co., et. al, No. 1:11-cv-03432-TWT (N.D. Ga.).  The California case is National Union Fire Insurance Co. v. Electronic Arts, Inc., et al., No. 3:11-cv-04897 (N.D. Cal.).  Both involve the defense of antitrust claims relating to the use of likenesses of college athletes.

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This entry was posted in Advertising injury, Class Actions, Coverage Defenses, Intentional Misconduct and tagged , , , . Bookmark the permalink.

One Response to Courts Rebuff Policyholders Who Seek Defense of Antitrust Class Actions

  1. Brian Jones says:

    Great post, Steve. I’ll be interested to learn whether the Seventh Circuit’s interpretation of the claim gets applied in the Georgia and California cases.

    Like

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