A federal appellate court has sustained a lower court’s verdict favoring a group of insurers, including Liberty Mutual Insurance Group divisions, in a product liability coverage disagreement. The court found that the misrepresentation of the origin of coffee beans does not constitute disparagement.
Based in Nunica, Michigan, L&K Coffee LLC, a coffee roaster and vendor, along with several other coffee firms, was prosecuted for “false indication of origin, false marketing, and unfair trade practices,” in violation of the federal Lanham Act. The lawsuit was brought forward by coffee cultivators in Hawaii’s Kona region, as per the 6th U.S. Circuit Court of Appeals in Cincinnati’s ruling in the case L&K Coffee LLC, d/b/a Magnum Roastery; Kevin Kihnke v. LM Insurance Corp.; Liberty Insurance Corp.; Selective Way Insurance Co.; Valley Forge Insurance Co.; Continental Casualty Co.
The plaintiffs accused the defendants of misrepresenting the origin of their coffee as Kona, whereas most of the coffee beans used in their products were actually procured from various other global regions.
L&K requested their insurers to offer defense and indemnification under their “personal and advertising injury” coverage policies. When the insurers refused, L&K took the matter to the U.S. District Court in Grand Rapids, Michigan. The District Court sided with the insurers, a verdict which was later confirmed by a three-judge appellate panel.
L&K argued that the insurers were obliged to defend it based on the disparagement and slogan violation aspects of its policies’ personal and advertising injury coverage.
The panel’s decision highlighted that the term “disparagement” was not present in the plaintiffs’ complaint. The core argument of the complaint was that L&K incorrectly declared that its coffee originated from the Kona region.
However, the ruling stated, “this is not ‘disparagement’ as comprehended under Michigan law and hence, under the agreement.”
Gregory M. Hatton, L&K’s legal counsel from Hatton Petrie & Stackler APC in Aliso Viejo, California, issued a statement. Part of it read, “I am not in agreement that any Kona farmer suffered due to the labeling issues in the underlying case. But this was a case demanding a duty to defend, and the allegations are what impel the insurer’s duty to defend. The meritlessness of the allegations is irrelevant to the duty to defend.”
The insurers’ legal representatives did not offer any comment in response to requests.
