Insurance Coverage for Antitrust Disputes
Insurance Coverage for Antitrust Disputes
By David A. Gauntlett
INTRODUCTION
Where to Find Antitrust Insurance Coverage
Express coverage for antitrust lawsuits arise under a variety of policy forms that do not expressly reference antitrust tort. Potentially applicable policies include: Directors and Officers (“D&O”), Errors and Omissions (“E&O”), Commercial General Liability (“CGL”), and, on occasion, Media[1] policies as well as sublimited antitrust policies or endorsements.
“WRONGFUL ACTS” COVERAGE UNDER D&O POLICIES
Exclusions to Coverage Under “Wrongful Acts”
· Antitrust: Under Directors and Officers (D&O) policies, intellectual property claims and antitrust claims are expressly excluded from coverage EXCEPT where an officer or director is named.
· Insured vs. Insured: Insurers will exclude coverage for claims that address lawsuits between Directors and Officers and shareholders of the same company to avoid any collusion and fallout from infighting at the company.
· Misconduct: Losses related to criminal or deliberately fraudulent activities are expressly excluded from D&O policies as well as claims where an individual insured acquires illegal profits or remuneration. Defense for such a Loss, however, is typically covered until final adjudication in the underlying action is established to be criminal and/or fraudulent conduct.
· Other Insurance: D&O policies most commonly contain exclusions pertaining to coverage that is offered in other policies. Insurers typically look to “other insurance” provisions where conduct falling within E&O or CGL “personal and advertising injury” coverage is implicated.
· Prior Knowledge: Insurers restrict or exclude coverage for claims or conduct that the insured had known or may know prior to purchasing the policy and completing the policy application.[2]
Defense Costs Limitations Under D&O Policies
Under an “Allocation: provision, D&O policies may expressly exclude defense cost reimbursement for uncovered portions of a claim or proportionately determine the amount of defense reimbursement between covered and uncovered aspects of a claim under an “Allocation” provision.
“PERSONAL/ADVERTSING INJURY” COVERAGE FOR ANTITRUST CLAIMS
“Personal and advertising injury” coverage, while unavailable for antitrust claims per se may be implicated by other tortious claims asserted in those suits. The causes of action asserted in tandem with counts for unfair competition or tortious interference trigger defense duties under one or more of the “personal and advertising injury” offenses.[3]
· Discrimination:
Equals “disparate or differential treatment”: Discrimination may be factually implicated by allegations of disparate economic treatment.[4]
· Unfair Competition:
Courts have held that common law unfair competition includes many varieties of conduct beyond “passing off.” It can encompass torts that in the process lessen equal competition in the market.[5]
· “Use of Another’s Advertising Idea in Your ‘Advertisement’”:
o The pertinent offense does not use any tort language in its phraseology. An objective reference to this policy language reveals that it is indeed far broader than the prior policy term – “misappropriation of advertising ideas.” [6]
o Price fixing and false advertising are forms of unfair competition that may fall within this offense where they address deceiving consumers into paying more for products than an honest market would require and communications with misleading information about the viability of alternative product sources. In the process competition is lessened.[7]
· Malicious Prosecution:
“Malicious Prosecution” refers to prosecutions begun in malice without probable cause to believe that the charges can be sustained. An action for damages is brought by a person against whom civil suit or criminal prosecution has been instituted maliciously and without probable cause. The cause of action is initiated after termination of the prosecution of such suit in favor of person claiming damages.[8]
· Reputation Torts:
o Disparagement:
In the 2001/2013/2017 ISO CGL Coverage B for “Personal Injury and Advertising Injury” are part of a combined definition that encompass any form of disparagement in an actionable publication causing injury.[9]
o Defamation:
“Defamation” encompasses libel or slander where slander is oral; libel is written. Publication of a false statement that is injurious to a claimant is a covered offense under Coverage B.[10]
CONCLUSION
A number of courts have determined that fact allegations and claims for relief often asserted in conjunction with antitrust litigation may implicate potential coverage under distinct policy forms. Seeking the assistance of coverage counsel with expertise in the nuances of antitrust coverage law is advisable in evaluating potential coverage for antitrust lawsuits.
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[1] Media policies typically include coverage for limited forms of unfair competition, but exclude antitrust lawsuits. But see, Big Bridge Holdings, Inc. v Twin City Fire Ins. Co. 132 F. Supp. 3d 982, 990 (N.D. Ill.. 2015) (Applying Minnesota law) (“Beyer and Integra are directly on point. The plain language of Section V(A)(5), read as a whole, excludes antitrust violations and other anti-competitive conduct. Any argument that the exclusion should be read broadly because certain antitrust laws mentioned in the exclusion (e.g., unfair trade practices and the FTC Act) have applications beyond the antitrust realm is unavailing…Because "unfair trade practices" is, at a minimum, ambiguous, the Court must follow Minnesota law, whereby "[a]ny ambiguity is resolved in favor of the insured.")
[2] Bedivere Ins. Co. v. Blue Cross & Blue Shield of Kansas, Case No. 18-2371-DDC 2021 U.S. Dist. LEXIS 41466, *17 (D. Kan. Mar. 5, 2021) (Discovery was permitted addressing settlement agreements between Travelers related to anti-trust litigation under its Healthcare Organization Directors and Officers Excess Liability Policy and objections to a distinct interrogatory were denied.)
[3] COMSAT Corp. v. St. Paul Mercury Ins. Co., Civ. No., 97-2236, 1998 U.S. Dist. LEXIS 2916, *14-15 (D. Minn. Mar. 6, 1998) (The court rejected St. Paul’s argument “[that] ‘making known ... materials that belittle products’ offense could only be triggered by a trade libel claim but not fact allegations of disparagement in a tortious interference claim. In many cases interference with contract is not so much a theory of liability in itself as it is an element of damage resulting from the commission of some other tort ... [t]he facts in the Sea-Fone Amended Complaint alleged conduct as a basis for the tortious interference claim which arguably constitutes the personal injury offense in the St. Paul policy ... The bulk of cases involving interference . . . also involved the commission of some independent tort. Thus in many cases interference with contract is not so much a theory of liability in itself as it is an element of damages resulting from the commission of some other tort.’”)
[4] Federal Ins. Co. v. Stroh Brewing Co., 127 F.3d 563, 568 (7th Cir. (Ind.) 1997) (“Federal concedes that discrimination can be defined as differential treatment. . . . [E]ven if we agreed with Federal’s position . . . we would find that the term ‘discrimination’ as used in the Heileman policy is ambiguous. Thus we must interpret the term in favor of coverage and against Federal.”); but see, Mylan Labs. v. Am. Motorists Ins. Co., 700 S.E.2d 518, 526 (W. Va. 2010) (“As used in the ‘Personal Injury’ section of the Federal policy, ‘discrimination’ refers to the standard types of discrimination (e.g. race, handicap) and not, as asserted by Mylan, ‘any form of discrimination within the field of commerce,’ which is the definition of ‘economic discrimination.’”).
[5] Hewlett-Packard Co. v. CIGNA Property & Cas. Ins. Co., No. 99-20207 SW, 1999 U.S. Dist. LEXIS 20655, at *15-19 (N.D. Cal. Aug. 24, 1999) (“Unfair competition … can be found when the defendant engages in any conduct that amounts to a recognized tort and when that tort deprives the plaintiff of customers or other prospects.")
[6] Basic Research, LLC v. Admiral Ins. Co., 2013 UT 6, 12 (2013) (“Basic Research’s having misappropriated or otherwise wrongfully used the advertising slogan of ‘another’…would require indemnification where there is any but-for causal link between the ‘use of another’s advertising idea’ and an underlying plaintiff’s damages, no matter how legal irrelevant the link.”)
[7] Flodine v. State Farm Ins. Co., No. 99 C 7466, 2001 U.S. Dist. LEXIS 2204, *35 (N.D. Ill. Mar. 1, 2001) (“Capitalizing upon the goodwill associated with Indian-made products is a marketing idea concerned with how to persuade consumers to buy certain goods.”)
[8] Ethicon, Inc. v. Aetna Casualty & Surety Co., 737 F. Supp. 1320, 1329 (S.D.N.Y. 1990) (“[R]eview of Handgards’ amended and supplemental complaint, filed in 1974, indicates that, on its face, the complaint alleged facts and claims that could be said to comprise a common law claim for malicious prosecution, which is explicitly covered by the policies at issue... This conclusion is bolstered by a review of the Joint Pretrial Statement filed by Handgards and Ethicon... [Therein], plaintiff alleges facts which would make out a claim for malicious protection.”); but see, Purdue Frederick Co. v. Steadfast Ins. Co., 836 N.Y.S.2d 28 (N.Y. App. Div. (1st Dept.) 2007) (“In the underlying litigations, however, the claim is not malicious prosecution…but rather antitrust violations. That they refer to certain “sham litigation”… to maintain the monopoly on the manufacture and sale of the drug OXY COTIN does not transform the antitrust claims in ones for malicious prosecution.”)
[9] Vector Products, Inc. v. Hartford Fire Ins. Co., 397 F.3d 1316, 1320 (11th Cir. (Fla.) 2005) (Statements that the insured’s product was superior to the “leading brand” disparaged competitor, even though it was not identified in advertisements”); Barnett v. Fireman’s Fund Ins. Co., 90 Cal. App. 4th 500, 509 (2001) (“[A]ppellants told numerous persons that MedPartners’ methods of doing business were flawed and would result in MedPartners’ failure, and made other representations that disparaged and damaged MedPartners and SCMC”).
[10] Liberty Mutual Ins. Co. v. OSI Indus., Inc., 831 N.E.2d 192, 199 (Ind. Ct. App. 2005) (Statements that questioned who had ownership rights to exclusive secret technology were disparaging.)