Insurers Too Quick to Deny Potential Coverage under CGL Policies
By David A. Gauntlett*
Introduction
It is no secret that insurance companies are loathe to depart with their money. Despite their best efforts to narrow the scope of coverage remaining under a standard Commercial General Liability (“CGL”) policy, many lawsuits still include at least one potentially covered claim. This is enough to require a full defense of the entire lawsuit.[1] For this reason, insurers are eager to turn a blind eye toward implicit allegations that might trigger a defense. Sometimes this practice even leads to ignoring the insurer’s tender completely, as General Mills recently alleged.
Insurers Deny Potential “Bodily Injury” Coverage for General Mills
General Mills has filed a lawsuit in federal court in Pennsylvania against its insurers, arguing that they are obligated to defend and indemnify the company in a growing wave of lawsuits tied to ultraprocessed foods. The company claims that both Liberty Mutual and Chubb subsidiary Ace Property and Casualty Insurance Co. have either delayed or failed to properly acknowledge coverage responsibilities under a series of commercial liability policies. General Mills says it has already spent substantial sums defending itself and related defendants in lawsuits alleging that the company knowingly manufactured addictive ultraprocessed foods and marketed them aggressively to children. One of the central cases was brought in late 2024 by Bryce Martinez, who alleged that consuming these products contributed to his development of Type 2 diabetes and nonalcoholic fatty liver disease. General Mills notified its insurers of the claims in early 2025, seeking defense coverage under policies spanning more than a decade.
According to the complaint, Liberty Mutual agreed to provide a defense but did so under a “reservation of rights,” meaning the insurer questioned whether the allegations actually qualified as a covered “occurrence” under the policies and reserved the right to deny coverage later based on exclusions for expected or intended injuries. Ace, which provided excess and umbrella liability coverage, allegedly acknowledged receipt of the claims but never formally stated its coverage position. Since the Martinez case was filed, General Mills says at least six similar lawsuits have emerged around the country, increasing the company’s legal expenses and creating uncertainty over who must pay ongoing defense costs. General Mills contends that all of the ultraprocessed-food lawsuits stem from a single occurrence under the insurance policies, meaning only one $2 million deductible should apply. Once that threshold is met, the company argues, Liberty Mutual must fully fund its defense costs, while Ace’s excess coverage would activate after Liberty pays qualifying judgments or settlements up to its limits.
The dispute highlights the growing legal and financial risks facing major food manufacturers as public scrutiny of ultraprocessed foods intensifies. Although the underlying lawsuits focus on alleged health harms caused by highly processed products and their marketing practices, the current federal action centers on insurance law and whether insurers must absorb the mounting litigation costs. General Mills argues that a judicial declaration is urgently needed because defense expenses continue to rise while uncertainty over coverage persists. The case could become significant not only for the company itself but also for the broader food and insurance industries, potentially shaping how liability insurers respond to future lawsuits involving diet-related illnesses and consumer protection claims. The matter is now pending before the U.S. District Court for the Eastern District of Pennsylvania.
Insurers Are Responsible for the Full Scope of Policy Language
Insurers rarely appreciate the full breadth of coverage provided by the plain language of a CGL policy. This is readily highlighted by examining case law analyzing “personal and advertising injury” offense “d” for “injury . . . arising out of . . . [o]ral or written publication, in any manner, of material that . . . disparages a person’s or organization’s goods, products or services.” In a previous blog, we discussed the potential for “implicit disparagement” coverage under the laws of many states.[2] But the “arising out of” language expands the scope of coverage even further to lawsuits brought by consumers who are indirectly injured by such disparaging publications.
In Miller v. Ghirardelli Chocolate Co.,[3]consumer-plaintiffs sued Ghirardelli under various sections of the CLRA, including Cal. Civ. Code § 1770(a)(8), because “Ghirardelli led customers to falsely believe that the baking chips were (or contained) chocolate, white chocolate and/or its principal ingredient, cocoa butter.”[4] The court ruled the consumer-plaintiff had standing for § 1770(a)(8) claim after purchasing products marketed with disparaging claims. [5]
City & Cnty. of San Francisco v. Purdue Pharma L.P., 491 F. Supp. 3d 610, 687 (N.D. Cal. 2020) also supports the conclusion that consumer allegations of indirect injury under the California statute fall within the scope of offense “d.” The court explicitly rejected the argument that § 1770(a)(8) requires statements that denigrate a particular competitor. The City of San Francisco sued several drug manufacturers (“Manufacturers”) for, among other things, violating § 1770(a)(8) by “making false misrepresentations about other medications, including nonsteroidal anti-inflammatory drugs (NSAIDs).”[6] The City sued not as a competing drug manufacturer but as an entity harmed by an opioid epidemic exacerbated by the Manufacturers’ disparaging advertisements. The Manufacturers argued that § 1770(a)(8) “requires the City to, at least, clearly implicate a false or misleading statement that refers to and demeans a specific competitor's product.”[7]
The court disagreed:
California courts have indicated that the CLRA only requires a party to have made disparaging statements about competing products generally, rather than about specific products. [citation] The City sufficiently alleges that Manufacturers disparaged all NSAIDs and relies on particularized facts to support its allegations.[8]
Thus, Cal. Civ. Code § 1770(a)(8) makes implicit negative comparative statements about competitors an actionable form of implicit disparagement.
Denials Usually Result from Broad Interpretation of Exclusions
Insurers will often concede that a claim falls within the scope of a policies basic insuring agreement. The dispute then arises over the potential application of exclusions. Just as they are quick to narrowly construe coverage provisions, so too are they eager to broadly interpret exclusions, despite the laws of every state requiring the opposite approach to policy construction.[9]
For example, insurers will often focus on boilerplate allegations of intent in the underlying complaint to justify application of a scienter-based exclusion. This despite case law across the country explaining why this practice is forbidden:
“Thus, although Gibson's complaint alleged Armadillo's intentional or willful conduct in support of Gibson's request for certain enhanced remedies provided by statute for intentional or willful behavior, it is far from apparent that Gibson's claims do not also contemplate and encompass the lesser compensatory relief available for less egregious conduct.”[10]
“An insurer does not meet its burden of establishing an exclusion's application by pointing to unproven and disputed allegations in the very complaint it is called upon to defend.”[11]
“[Plaintiffs may omit valid negligence counts] for strategic adversarial reasons.”[12]
Conclusion
When tendering any significant claim, a denial should be expected. Insurers almost always require analysis from coverage counsel to forcibly open their eyes to the basis for potential coverage. Often, even that is insufficient and a court needs to order them to do the right thing. Because of this pattern, no denial should be taken at face value. It is almost always worth consulting coverage counsel to review your claim and determine if the denial was justified.
*David A. Gauntlett is a principal of Gauntlett Law and represents policyholders in insurance coverage disputes regarding intellectual property, antitrust, and business tort claims, as well as in the underlying actions. Mr. Gauntlett can be reached at (949) 514-5662 or dag@gauntlettlaw.com. For more information, visit Gauntlett Law at www.gauntlettlaw.com.
[1]Horace Mann Ins. Co. v. Barbara B., 4 Cal. 4th 1076, 1081 (1993) (“Once the defense duty attaches, the insurer is obligated to defend against all of the claims involved in the action, both covered and noncovered[.]”)
[2] David A. Gauntlett, Implicit Disparagement Insurance Coverage Survey, https://www.gauntlettlaw.com/blogs/implicit-disparagement-insurance-coverage-survey (Apr. 18, 2024)
[3]Miller v. Ghirardelli Chocolate Co., No. C 12-04936 LB, 2013 WL 1402682 (N.D. Cal. Apr. 5, 2013).
[4]Ghirardelli, 2013 WL 1402682 at *6.
[5]Id. at *2.
[6]City & Cnty. of San Francisco, 491 F. Supp. 3d at 686; see alsoDel Monte Fresh Produce N.A., Inc. v. Transportation Insurance Co., No. Civ.A. 06 C 1658, 2006 U.S. Dist. LEXIS 58986, *14 (N.D. Ill. Aug. 8, 2006), aff’d, 500 F.3d 640 (7th Cir. (Ill.) 2007) (negative comparative advertising denigrated competing pineapple producers whose fruit did not possess the patented characteristics).
[7]Id. at 687.
[8]Id. (emphasis in original).
[9]See, e.g., My Choice Software, LLC v. Travelers Cas. Ins. Co. of Am., 823 F. Appx 510, 512 (9th Cir. (Cal.) 2020) (“Applying the ‘arising out of’ exclusionary language to the allegations asserted in the Trusted Tech cross-complaint runs counter to the principle that ‘insurance coverage is interpreted broadly so as to afford the greatest possible protection to the insured, [whereas] . . . exclusionary clauses are interpreted narrowly against the insurer.’”)
[10]Allied Prop. & Cas. Ins. Co. v. Armadillo Distribution Enters., Inc., No. 4:21-CV-00617-ALM, 2022 WL 3568482, *9–11 (E.D. Tex. Aug. 18, 2022).
[11]KM Strategic Mgmt., LLC v. Am. Cas. Co. of Reading PA, 156 F. Supp. 3d 1154, 1170 (C.D. Cal. 2015).
[12]Hudson Ins. Co. v. Colony Ins. Co., 624 F.3d 1264, 1296 (9th Cir. (Cal.) 2010).