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June 22, 2022 Feature

Duty to Defend Disparagement in Luna and Sprint Lumber

David A. Gauntlett and Diane Bucci
alexey_ds/E+ via Getty Images Plus

alexey_ds/E+ via Getty Images Plus

Although policyholders and insurers disagree about the scope of the offense (d) covering disparagement, both concur that fact allegations matter.

Commercial general liability policies include a Coverage B for personal and advertising injury liability. This coverage agrees to “pay those sums that the insured becomes legally obligated to pay as damages because of ‘personal and advertising injury’ to which [the] insurance applies.”1 This leads us to the definitions section of the policy. “Personal and advertising injury” is defined as injury arising out of one or more listed offenses—some would call them specified perils. One of those offenses is “d. [o]ral or written publication, in any manner, of material that slanders or libels a person or organization or disparages a person’s or organization’s goods, products or services” (often referred to as offense (d)).2

Two recent cases illustrate the different results that are possible in determining when an insurer has a duty to defend a lawsuit related to the Coverage B disparagement offense. In Travelers Indemnity Co. of America v. Luna Gourmet Coffee & Tea Co. LLC,3 a federal district court in Colorado held that there was no duty to defend an action for disparagement because not all elements of the tort of disparagement had been met. In Sprint Lumber, Inc. v. Union Insurance Co.,4 a Missouri appellate court found that the duty did exist where there was evidence of but no formal claim for disparagement. Why are those results different?

Disparagement Coverage Cases Adopt Conflicting Analytical Approaches

Both sides want a clarifying analytical approach to ascertain when disparagement coverage is implicated to minimize litigation costs driven by uncertainty when the labels “explicit” and “implicit” (or implied) disparagement have unclear contours as those terms are applied by a plethora of court opinions. Two significant issues that cut across the decisions and the analysis are, on the one hand, how to read the meaning of the offense and, on the other hand, how to read the pleadings—and where permitted the extrinsic evidence—in determining if there is a duty to defend. As to the first issue, litigants and courts debate whether disparagement ought to be interpreted with a simple dictionary definition (e.g., “to speak slightingly of”), or whether it should be understood as the tort of disparagement as defined in the law. As to the second issue, the question is, first, does the jurisdiction follow a four-corners standard or extrinsic standard in evaluating the duty to defend, and, with that determined, how does the court read the complaint or petition and that evidence, and what does it infer, to determine if there has been a claim of disparagement asserted?

One debate is whether the insured’s misrepresentation concerning its own product is implicit disparagement where no organization’s or individual’s products, goods, or services were demeaned, as opposed to scenarios where a company’s capacity to operate as a viable or effective business is directly attacked.


In Luna, the court analyzed two underlying actions, one by farmers of Kona coffee, and another by consumers of Kona coffee (respectively, the Kona Farmers Action and the Kona Consumers Action, collectively addressed as the Kona Class Actions). The lawsuits alleged that the defendants (including the insured in the coverage litigation) labeled their coffee products with “Café Kona” and “Kona Blend” and prominently placed KONA on the packaging.5 In doing so, the defendants allegedly misrepresented the geographic origin of the product and the quality and contents commonly associated with Kona coffee. The Kona Farmers Action asserted one claim for relief under the Lanham Act for false designation of origin, false advertising, and unfair competition. The Kona Consumers Action asserted claims for relief for (1) breach of express warranty under the Uniform Commercial Code (UCC); (2) breach of implied warranty under the UCC; (3) fraud, fraudulent concealment, and intentional misrepresentations; and (4) quasi-contract—unjust enrichment—restitution.

After the insured sought coverage under its policy for the Kona Class Actions, the insurer filed an action seeking a determination that it had no duty to defend. The coverage lawsuit was litigated in Colorado. The policy was issued to the insured at its address in Colorado. The two underlying lawsuits were pending in Washington. Applying Colorado insurance coverage law, the court interpreted “disparagement” in context to mean the tort of disparagement, and it applied both the Washington and Colorado definitions of the tort of disparagement in determining whether there was disparagement within the meaning of the policy. The court in the coverage litigation also applied the Colorado “complaint rule,” focusing its analysis of the duty to defend on the complaint itself, and not relying on extrinsic evidence to show a duty to defend.

The insured argued that the class action plaintiffs had alleged depreciation of the value of Kona farmers’ products by indirect means constituting “implicit disparagement.” The insured reasoned that implicit disparagement allegedly arose because false statements were made that its product contained Kona coffee when it did not, that this in turn allegedly impugned or was derogatory to coffee from the Kona district, and that this in turn allegedly impugned Kona farmers’ products.6

The district court found that this was too remote to constitute disparagement within the meaning of the policies or the element of the tort claim under Washington or Colorado law. And as to the Kona Consumers Action, the court found that the consumers did not allege that they or their products were disparaged.

Policyholder counsel argument. The court in Luna presumed that false, frivolous, and groundless claims did not entitle the insured to a defense if the court could deduce why the insured had not been sued for potentially covered claims, based on the court’s understanding of what facts would suffice to create a colorable claim for relief.

Where the insurer contends that the lawsuit does not state a viable claim for relief, it must defend a suit to remove what the insurer asserts are scurrilous claims.7 An insurer may seek to substitute the common-law tort of product disparagement as the sole reasonable meaning for the undefined term “disparage” in its policy despite its election to not so limit its definition, but few courts have adopted that narrow construction of this offense.8 Where the facts alleged are susceptible of a construction that evidences any form of disparagement, a defense duty arises.9

Cases that predate the last decade had no occasion to analyze coverage for implicit disparagement.

The Luna court determined that the insurer did not owe the insured a defense for the putative class action suits against the defendants for their use of the name “Kona” in connection with coffee distribution. Those lawsuits were based on the insured’s actions that diminished the value of “Kona coffee” as a commodity, leading consumers to conclude that it was “nothing special.”10

The court found that the conduct by the insured was not actionable as any form of disparagement because it was “too remote to constitute disparagement within the meaning of the Policies or the element of the claim under Colorado or Washington law.”11 In doing so, the court failed to take into consideration the fact that injury can be indirect under the pertinent policy language. Several courts have come to this conclusion.12

The court’s application of Washington and Colorado tort law ignored the fact that the policy did not define disparagement as limited to any enumerated tort, in contrast to the policy’s express inclusion of coverage for “libel” or “slander” in the same policy provision. Its approach presumed that “disparagement” coverage is limited by its terms to a particular tort for trade libel or product disparagement or other form of injurious falsehood.13 Substituting the elements of a tort for an offense runs counter to the rule that the duty to defend “is not abrogated by the fact that the cause of action stated cannot be maintained against the insured either in law or in fact”14 as “all essential elements of the covered claim are alleged in the [tendered] complaint.”15

Nor does it matter if the offense could be, but was not, defined by a singular tort: “The word ‘offense’ cannot be read to limit coverage only to a particular ‘cause of action’ or ‘claim.’ The word ‘offense’ simply does not have this meaning in either common usage or legal usage.”16 Equally critical, the majority of forums have acknowledged that potential coverage arises for implicit as well as express disparagement.17 Indeed, three Ninth Circuit cases have concluded that expressly asserted disparaging statements are not required to establish a defense of implicit disparagement.18 Moreover, a number of the decisions referenced by insurers reveal adoption of implicit disparagement arguments.19

Insurer counsel argument. Most insurers would agree that under certain circumstances, implied disparagement can be “implied,” especially if the issue is the legal labeling of a claim. However, given the applicable background and governing jurisdictional precedent, Luna was decided correctly. The fundamental point is that to show “implied disparagement,” a party must show that facts were pleaded that expressly or impliedly satisfy the elements of the tort of disparagement.

In Luna, the court followed Thompson v. Maryland Casualty Co.20 to hold that while the disparagement label does not define coverage, the allegations must impliedly satisfy those provisions to obtain coverage under offense (d).21 Although the Luna court did not address this point directly, its reasoning and holding were based on the absence of derogatory statements or references made about Kona coffee; any product, good, or service; the coffee farmers; or the consumers of Kona coffee.22

The duty to defend analysis applies only if the insured first carries its burden to establish that the entirety of offense (d) (i.e., disparagement of a person’s or organization’s goods, products, or services) is potentially implicated.23 Until some showing in this regard has been made, there is no duty to defend.24

Even in states recognizing implicit disparagement, the allegations (Colorado follows the “complaint rule” and focuses on the complaint itself and does not consider extrinsic evidence to show that a duty to defend exists) must clearly indicate disparagement of a person’s or organization’s goods, products, or services.25 The class action plaintiffs alleged that the insured falsely designated “Kona” on its coffee product labels, passing off ordinary commodity coffee as “Kona coffee,” which would allegedly cause consumers to think Kona coffee is nothing special, and allow the insured to flood the market and drive prices down.26 The insured’s argument was that there was a loss of value and reputation of Kona coffee because of the insured’s false labeling.27 However, loss of value and damage to reputation are not what offense (d) covers.28 The offense does not contain any language that would suggest they are covered.29 To be sure, loss of value or damage to reputation may be the resultant damages to the claimant from the activities covered by offense (d), including disparagement of a person’s or organization’s goods, products, or services.

Moreover, implying disparagement based on a loss of value would ignore that more than disparagement in the air is required to obtain offense (d) coverage. Requiring less would essentially convert almost every business tort into a claim for disparagement because business torts can involve an alleged lessening of (or attempt to lessen) the value of another’s product at the hands of the insured. A business’s goodwill can be reduced by many things that are not torts, or that are torts but do not qualify as disparagement of goods, products, or services. If the goodwill flows from a favorable location and the landlord does not renew the business’s lease, that might diminish the business’s goodwill. If a product supplier refuses to supply product to the business because of a billing dispute, that may diminish the business’s goodwill. A vendor supplying defective components to a manufacturer may damage the reputation of the manufacturer, or cause loss of goodwill, but that is not disparagement of goods, products, or services. Loss of goodwill, without more, does not establish disparagement of another’s goods, products, or services. These actions are not transformed into offense (d) claims simply because the good, product, or service lost value.

Insureds are very quick to argue that the court should not impose limitations on coverage that are not specifically written in the policy but just as quick to ignore important policy language when helpful. It bears repeating, offense (d) requires a statement (“an oral or written publication, including publication by electronic means, of material”30) made against an individual’s or organization’s goods, products, or services.31 The relationship between an insurer and its insured is contractual and governed by the insurance policy. The language of the policy controls absent extraordinary circumstances.32 The insurer takes a financial risk in exchange for a premium that reflects the coverages provided, and courts should not engage in gymnastics to create coverage.33

Moreover, the absence of a definition for disparagement does not create an ambiguity that warrants an interpretation in the insured’s favor. A term is not ambiguous just because there may be multiple interpretations or it may have different dictionary definitions in different contexts.34 Instead, ambiguity requires a showing that the term is reasonably susceptible to multiple interpretations in the context in which it is used.35 Terms cannot be ignored in order to create an ambiguity.36 Even if the term “disparagement” were construed very broadly in favor of the insured, the offense would still not be satisfied in the Luna case.37 Without a derogatory statement directed to a specific person’s or organization’s specific product, it is just false advertising, fraud, or the like.38 Courts should refrain from characterizing a claim as disparagement when the allegations are essentially based on the insured’s false labeling of its own product.

Although the objective reasonable expectations of the insured are only examined in the case of ambiguity, which is not present in Luna, an insured cannot reasonably expect coverage for false labeling or fraud. Nor can it reasonably expect coverage under any offense simply based on a loss of value. In fact, the whole point of advertising is to promote one’s product vis-à-vis other competitor products. That is not an offense. It is business as usual, for better or worse.

Sprint Lumber

In Sprint Lumber, Inc. v. Union Insurance Co., Sprint sought a declaration that Union wrongfully refused to provide personal and advertising injury coverage and a defense in an action initiated against Sprint by a competitor.39 Sprint and Porters Building Centers competed in the lumber and building supplies business in northwest Missouri and northeast Kansas. Certain Porters employees left to join Sprint. Porters sued Sprint and the former employees in federal court in Missouri, asserting claims for violation of the Computer Fraud and Abuse Act and the Missouri computer tampering statutes, violation of the Missouri Uniform Trade Secrets Act, breach of restrictive covenants and of the duty of loyalty, tortious interference with business expectancy, civil conspiracy, antitrust, and trespass.

Sprint notified Union of its claim for coverage, and Union denied coverage. Union argued that Porters’s claims and damages were based on allegations of knowingly misappropriating confidential information, trade secrets, and customer contacts, and did not implicate coverage under offense (d) of the definition of “personal and advertising injury.”40

Applying Missouri insurance coverage law, the trial court interpreted “disparagement” to mean “to lower in esteem or reputation,” “to diminish the respect for,” “to lower in rank by actions or words,” or “to speak slightingly of.”41 The court held that the meaning of the offense of disparagement of a person’s or organization’s goods, products, or services is not limited to the tort of disparagement.

The court in the coverage litigation also applied Missouri law, which first looks at the facts alleged in the petition to determine if there was a duty to defend. But Missouri law also looks to facts that the insurer knew or could have ascertained from a reasonable investigation. That is to say, it also considers extrinsic evidence in determining if there was a duty to defend.

The court considered the original, first, and second amended petitions; a motion for a temporary restraining order; and two motions for a preliminary injunction. The pleadings and motion papers alleged that the former employees and Sprint conspired to capture Porters’s sales, copy its confidential information and trade secrets, then “dump” that information from Porters’s own computer system; wrongfully solicited employees and customers of Porters; and diverted sales and business and customer relationships to Sprint, harming Porters’s goodwill and reputation. Porters further alleged that Sprint challenged Porters’s ability to carry on operations without the former employees and conveyed false information regarding the circumstances of the former employees’ departure in a way that reflected negatively on Porters.

The appellate court upheld the trial court’s decision applying a broad definition of disparagement and finding that offense (d) was implicated.42

Policyholder counsel argument. Recognizing the applicability of Missouri coverage case law and considering the facts before it, the court rejected case authority relied on by Union, noting:

The Missouri Supreme Court, however, specifically declined to follow Select Design in McCormack. It found that Select Design was “directly contrary” to its decision that coverage for the disparagement of another’s goods, products, or services does not turn on whether a specific cause of action such as defamation, libel, slander, or injurious falsehood is asserted against the insured.43

The McCormack decision critically defined “disparage” as “‘to lower in esteem or reputation,’ ‘to diminish the respect for,’ ‘to lower in rank by actions or words,’ or ‘to speak slightly of.’”44 This broad construction of disparagement is consistent with the majority of decisions nationwide that have analyzed this offense and presumed that a layperson’s understanding of the term “disparagement” governs so that it need not meet common-law elements to trigger a defense duty.

Insurer counsel argument. Sprint Lumber was correctly decided based on the precedent and facts, but its holding does not diminish the ultimate point in Luna. There has to be some kind of derogatory statement that impugns an individual’s or organization’s goods, products, or services in order to implicate offense (d).45 In Sprint Lumber, any number of facts would establish those elements, whether pleaded or not.

The Sprint Lumber court relied on McCormack Baron Management Services, Inc. v. American Guarantee & Liability Insurance Co.46 to define “disparage” as “‘to lower in esteem or reputation,’ ‘to diminish the respect for,’ ‘to lower in rank by actions or words,’ or ‘to speak slightingly of.’”47 McCormack also established that the tort elements for a disparagement offense need not be pleaded for the coverage offense to apply, reasoning that the policy covers “offenses,” not just causes of action, which assumes that an offense is broader than a cause of action.48

But like Sprint Lumber, the McCormack court did not have to stretch to find disparagement. The claimant, a security guard at a building complex, alleged that he was disparaged when a building manager provided a letter to his boss stating that he was insubordinate, and he was fired as a result.49 In McCormack, there was no question that being called insubordinate in the employment context would be disparaging and that the other requirements of offense (d) were satisfied. The question before the court was whether the tort elements of knowingly false or malicious intent on the part of the insured had to be satisfied. The McCormack court held that requiring knowledge or intent would trigger the knowledge of falsity exclusion, which would result in illusory coverage for offense (d).

The Select Design case, cited by Union, interpreted Vermont law. There, an employee of one custom design screen-printing business left to join another, the insured’s. The former employer sued the insured and the former employee. The court found that the former employer’s complaint did not allege that the insured disparaged the former employer’s products or services. The court reasoned that not all comparison-based advertising is actionable and that there was no allegation that, nor could it be said that, the former employee “necessarily went over the line of protected commercial speech.”50 The court held that disparagement does not just mean comparing a competitor’s product or service unfavorably with one’s own but must constitute an “injurious falsehood” to be actionable.51


Sprint Lumber and Luna are different cases on the facts and under the law that applied in each case. The Sprint Lumber court was evaluating ascertainable facts, whereas in Luna there was no disparaging oral or written statement. In Luna, the court would have had to characterize false labeling as disparagement without any ascertainable facts that satisfied any of the offense (d) requirements. An insured pays for coverage under offense (d) pursuant to the offense’s terms. The insured pays for disparagement coverage as written in the policy and interpreted by the courts in the relevant jurisdiction. It is not a coverage that can be molded at the whim of either the insured or the insurer.

Policyholders and insurers continue to disagree about the scope of the offense (d) covering disparagement. Both concur, however, that fact allegations matter. In those forums that permit evaluation of facts beyond the complaint’s allegations, addressing potential coverage may require a deeper dive to either foreclose or establish the insurer’s duty to defend policyholders charged with tort liability for injury to the reputation of another’s property or services.


1. Ins. Servs. Off., Inc. (ISO), Com. Gen. Liab. Coverage Form CG 00 01 04 13, § I, ¶ B.

2. Id. § V, ¶ 14.d.

3. 533 F. Supp. 3d 1013 (D. Colo. 2021).

4. 627 S.W.3d 96 (Mo. Ct. App. 2021), reh’g denied (June 1, 2021), transfer denied (Aug. 31, 2021).

5. The suit alleged that only coffee grown on farms located in the Kona district can be marketed, labeled, and sold as Kona coffee. Luna, 533 F. Supp. 3d at 1016.

6. Id. at 1023–24.

7. Aurafin-OroAmerica, LLC v. Fed. Ins. Co., 188 F. App’x 565, 566 (9th Cir. 2006) (“[Acknowledging that the] counterclaims alleged each element of libel, but that the facts did not support a libel claim as a matter of law, the district court applied the wrong legal standard and impermissibly considered the merits of the libel claim. The viability of the underlying claim against the insured does not affect an insurance company’s duty to defend. Rather, even when the underlying action is a sham, the insurer may terminate its duty to defend only by ‘demur[ring] or obtain[ing] summary judgment on its insured’s behalf.’” (alterations in original)).

8. David A. Gauntlett, The Evolution of Insurance Coverage for Business Tort Claims under “Personal and Advertising Injury” Coverage, in Insurance Law 2015, at 22–25 (2015).

9. AAA Cabinets & Millworks, Inc. v. AMCO Ins. Co., No. 2:20-CV-0318-TOR, 2021 U.S. Dist. LEXIS 155029, at *12–13 (E.D. Wash. Aug. 17, 2021) (“While Defendant correctly notes the Underlying Complaint alleges that Plaintiffs attempted to trade on the goodwill of the KCMA certification mark, the Underlying Complaint also contained allegations that Plaintiffs’ inferior goods harmed the goodwill and reputation of the KCMA mark. Until the disputed facts and law were resolved, Defendant had a duty to defend.” (citations omitted)).

10. Luna, 533 F. Supp. 3d at 1016.

11. Id. at 1024.

12. See, e.g., Hartford Fire Ins. Co. v. Vita Craft Corp., 911 F. Supp. 2d 1164, 1179 (D. Kan. 2012) (“The policies did not limit libel or slander coverage to claims by persons claiming to have been directly slandered or libeled, as opposed to persons claiming to have suffered by virtue of slander or libel of their licensees. Construed in favor of the insured, as Kansas law requires, the policy potentially covered injury to the underlying plaintiff for defamation or disparagement of a third party.” (citation omitted)).

13. But see Winklevoss Consultants, Inc. v. Fed. Ins. Co., 11 F. Supp. 2d 995, 1000 (N.D. Ill. 1998) (“[T]he policy offense of ‘disparagement’ is not synonymous with common law commercial disparagement. The [complaint] still includes factual allegations that Winklevoss made false negative comparative statements about Lynchval’s goods, causing Lynchval to lose sales. It does not matter that these allegations may not meet the technical requisites for stating a commercial disparagement claim.” (citations omitted)).

14. Abouzaid v. Mansard Gardens Assocs., LLC, 23 A.3d 338, 347 (N.J. 2011).

15. KM Strategic Mgmt., LLC v. Am. Cas. Co. of Reading, PA, 156 F. Supp. 3d 1154, 1164 (C.D. Cal. 2015) (alteration in original).

16. McCormack Baron Mgmt. Servs., Inc. v. Am. Guar. & Liab. Ins. Co., 989 S.W.2d 168, 171 (Mo. 1999).

17. Bankwest v. Fid. & Deposit Co. of Md., 63 F.3d 974, 981 (10th Cir. 1995) (“[T]he Houses did allege that these [estoppel letters sent by Bankwest] harmed a ‘legal interest . . . that ha[d] a pecuniary value.’”); Pennfield Oil Co. v. Am. Feed Indus. Ins. Co. Risk Retention Grp., Inc., No. 8:05CV315, 2007 U.S. Dist. LEXIS 21456, at *24 (D. Neb. Mar. 12, 2007) (“Pennfield’s dissemination of allegedly misleading advertisements and materials that allegedly hurt Alpharma’s sales, profits and good will . . . implicitly disparage Alpharma’s product because Alpharma is the only other manufacturer of the product with FDA approval.”); Safety Dynamics, Inc. v. Gen. Star Indem. Co., 475 F. App’x 213, 214 (9th Cir. 2012) (reversing a district court that attributed a narrow, specialized meaning to the word “disparage,” and finding coverage where the actual allegation was that the insured’s statements had misled the public about the relative cost and effectiveness of the products, which alone raised the potential for liability under the Lanham Act); Jar Labs. LLC v. Great Am. E&S Ins. Co., 945 F. Supp. 2d 937, 944 (N.D. Ill. 2013) (“[A] statement equating a competitor’s product with an allegedly inferior one is logically indistinguishable from, and no less disparaging than, a statement describing one’s own product as ‘superior’ to the competitors’.”); Hartford Cas. Ins. Co. v. Swift Distrib., Inc., 59 Cal. 4th 277, 294 (2014) (“In E.piphany [Inc. v. St. Paul Fire & Marine Ins. Co., 590 F. Supp. 2d 1244, 1253 (N.D. Cal. 2008)], [a defense arose] where a competitor had sued the insured, E.piphany, for falsely claiming to be ‘the “only” producer of “all Java” and “fully J2EE” software solutions, which was an “important differentiator” between competing products, even though some competitors offered products with these exact features.’”); Foliar Nutrients, Inc. v. Nationwide Agribusiness Ins. Co., 133 F. Supp. 3d 1372, 1382 (M.D. Ga. 2015) (“When Foliar reached out to PFS’ customers to both undermine PFS’ product and discourage PFS’ customers, . . . this arguably amounted to oral disparagement . . . . This is even more apparent because PFS alleged that Foliar’s false and misleading statements caused harm to their sales and goodwill.”).

18. Michael Taylor Designs, Inc. v. Travelers Prop. Cas. Co. of Am., 495 F. App’x 830, 831 (9th Cir. 2012) (finding defense where no explicit statement was made that goods, which Rosequist alleged were cheap knockoffs, were not from Rosequist); Nat’l Union Fire Ins. Co. of Pittsburgh, Pa. v. Seagate Tech., Inc., 466 F. App’x 653, 655 (9th Cir. 2012) (no explicit false statements that Convolve’s technology was no better than Seagate’s); W. Int’l Syndication Corp. v. Gulf Ins. Co., 222 F. App’x 589, 592 (9th Cir. 2007) (no explicit false statement that claimant Apollo lacked broadcast rights to the Apollo Show).

19. Thompson v. Md. Cas. Co., 84 P.3d 496, 503, 506 (Colo. 2004) (acknowledging the doctrine of implicit disparagement, but not finding it factually implicated); Jarrow Formulas, Inc. v. Steadfast Ins. Co., 509 F. App’x 591, 591 (9th Cir. 2013) (“Jarrow never mentioned the Bio Minerals supplement in its advertising, nor did Jarrow suggest that its supplement was superior to others. Rather, Jarrow’s advertisement simply referred to a study about the effect of the Bio Minerals supplement on calf skin.” (citation omitted)); Bullpen Distrib., Inc. v. Sentinel Ins. Co., 584 F. App’x 769, 771 (9th Cir. 2014) (“To the extent that AYI’s claim might be viewed as asserting that Bullpen attempted to pass off AYI’s business history and accomplishments as its own—and the complaint is rife with such suggestions—this alone, without statements that Bullpen ‘directly cast aspersions’ on AYI, does not constitute disparagement.” (citing Swift, 59 Cal. 4th at 296)); Wireless Buybacks, LLC v. Hanover Am. Ins. Co., 223 F. Supp. 3d 443, 448–50 (D. Md. 2016) (“[T]he underlying complaint need not allege the elements of the tort of disparagement, as interpreted in Maryland, in order to trigger coverage. . . . In Miranda v. California Capital Ins. Co., [No. A126778, 2011 Cal. App. Unpub. LEXIS 2419 (Mar. 29, 2011),] disparagement existed where an insured falsely represented that its inferior product was, in fact, a superior product from a competitor, and this misrepresentation was intended to tarnish the competitor’s reputation.”).

20. 84 P.3d 496, 502 (Colo. 2004).

21. Travelers Indem. Co. of Am. v. Luna Gourmet Coffee & Tea Co. LLC, 533 F. Supp. 3d 1013, 1022 (D. Colo. 2021) (following Thompson, 84 P.3d at 502). Precedent from both Colorado and Washington dictate this result. Teilhaber Mfg. Co. v. Unarco Materials Storage, 791 P.2d 1164, 1166 (Colo. App. 1989); Waechter v. Carnation Co., 485 P.2d 1000, 1004 (Wash. Ct. App. 1971).

22. Luna, 533 F. Supp. 3d at 1016–17, 1022–23.

23. Id. at 1019–20.

24. See id.

25. E.g., Hartford Cas. Ins. Co. v. Swift Distrib., Inc., 326 P.3d 253, 256 (Cal. 2014) (holding that advertisements for a product that resembled and had a similar name to a competitor’s product were not within “product disparagement” coverage, under personal and advertising injury provisions, and that the insured’s advertisement that its product was “superior” did not give rise to a claim for disparagement of the competitor’s product); Nat’l Union Fire Ins. Co. of Pittsburgh, Pa. v. Mead Johnson & Co., 913 F. Supp. 2d 682, 687 (S.D. Ind. 2012), aff’d, 735 F.3d 539 (7th Cir. 2013) (any injury that consumers suffered due to the insured’s advertising of its infant formula did not stem from defamatory or disparaging statements that were of, or concerning, consumers, and therefore the consumers’ underlying fraud claims against the insured did not fall within the “offense” of disparagement). In Mead Johnson, consumer lawsuits were filed in various states, including Florida, Massachusetts, New Hampshire, Alabama, Colorado, and California; the multidistrict litigation case was filed in the Southern District of Florida; and the insurance dispute was filed in Indiana. 913 F. Supp. 2d at 687. According to the court, all of those states require defamatory or disparaging statements to be of and concerning the plaintiff to be actionable. Id.

26. Luna, 533 F. Supp. 3d at 1016. Following precedent, the Luna court limited the analysis of the duty to defend to the four corners of the complaint. Id. at 1020–21. The Colorado Supreme Court has held that extrinsic evidence cannot be used to give rise to a duty to defend. Id. at 1020 (citing Chavez v. Ariz. Auto. Ins. Co., 947 F.3d 642, 646 (10th Cir. 2020)).

27. Id. at 1023.

28. See id. at 1023–24.

29. See id.

30. Id. at 1021 (quoting the policy language).

31. EMC Ins. Cos. v. Mid-Continent Cas. Co., 884 F. Supp. 2d 1147, 1155 (D. Colo. 2012) (“‘When all the elements of a claim covered by a policy are alleged, [the] insurer has a duty to defend its insured [under Colorado law], even if a claim is not labeled according to the terms used in an insurance policy.’ Conversely, if the underlying complaint fails to allege facts satisfying one of the elements of a claim covered in an insurance policy, an insurer has no duty to defend against that claim.” (citation omitted)).

32. Lexington Ins. Co. v. Sewerage & Water Bd. of New Orleans, No. 10-460, 2010 WL 4366430, at *3 (E.D. La. Oct. 27, 2010) (“[A]n insurance policy is a contract that constitutes the law between the insurer and the insured and as such the policy governs the nature of their relationship. The extent of coverage is determined by the terms of the insurance policy itself.” (citation omitted)); Bos. Gas Co. v. Century Indem. Co., 910 N.E.2d 290, 304 (Mass. 2009) (holding that interpretation of an insurance contract “is no different from the interpretation of any other contract”).

33. See Grinnell Mut. Reinsurance Co. v. Ctr. Mut. Ins. Co., 658 N.W.2d 363, 370 (N.D. 2003) (“While we regard insurance policies as adhesion contracts and resolve ambiguities in favor of the insured, we will not rewrite a contract to impose liability on an insurer if the policy unambiguously precludes coverage . . . [and] will not strain the definition of an undefined term to provide coverage for the insured.”).

34. Dish Network Corp. v. Arch Specialty Ins. Co., 989 F. Supp. 2d 1137, 1144 (D. Colo. 2013), aff’d sub nom. Dish Network Corp. v. Arrowood Indem. Co., 772 F.3d 856 (10th Cir. 2014).

35. Id.

36. Id.

37. See, e.g., Great Am. Ins. Co. v. Riso, Inc., 479 F.3d 158, 161 (1st Cir. 2007) (no disparagement because the insured did not defame the school districts) (applying Massachusetts law); Sanderson v. Ind. Soft Water Servs., Inc., No. IP 00-0459-CHK, 2004 WL 1784755, at *1, *7 (S.D. Ind. July 23, 2004) (claims for disparagement and defamation could not survive because “a reasonable jury could not find that the communications in question were directed at Sanderson or his products in particular”); Heritage Mut. Ins. Co. v. Advanced Polymer Tech., Inc., 97 F. Supp. 2d 913, 932 (S.D. Ind. 2000) (the insured manufacturer’s advertising of an allegedly stolen product design as “patent pending” was not disparagement of a competitor’s product sufficient to trigger advertising injury coverage); Nat’l Union Fire Ins. Co. of Pittsburgh, Pa. v. Mead Johnson & Co., 913 F. Supp. 2d 682, 687 (S.D. Ind. 2012), aff’d, 735 F.3d 539 (7th Cir. 2013) (“Mead Johnson’s defamatory or disparaging statements must be of and concerning the Consumer Plaintiffs or their products” and not purely economic). The Mead Johnson court affirmatively recognized that in Florida, Massachusetts, New Hampshire, Alabama, Colorado, Indiana, and California, any defamatory or disparaging statements must be of and concerning the plaintiff to be actionable. See also EMC Ins. Cos. v. Mid-Continent Cas. Co., 884 F. Supp. 2d 1147, 1155 (D. Colo. 2012) (no duty to defend when the underlying complaint fails to allege facts that satisfy all of the elements of the claim); Liberty Bank of Mont. v. Travelers Indem. Co. of Am., 870 F.2d 1504, 1508 (9th Cir. 1989) (“Because falsehood is an element of defamation, facts which set forth some elements of defamation but not falsehood, when construed in light of a complaint which does not include a cause of action for defamation, do not trigger a duty to defend.”) (applying Montana law); Parkham Indus. Distribs., Inc. v. Cincinnati Ins. Co., No. 3:06-CV-533-S, 2008 WL 451023, at *5 (W.D. Ky. Feb. 15, 2008) (no disparagement took place because the underlying insured’s advertisements never even mentioned the underlying plaintiff, never compared the products of the respective companies, and never discredited or denigrated the underlying plaintiff’s products).

38. S.A. Corp. v. Hartford Cas. Ins. Co., No. 1:15-cv-00071-GBL-MSN, 2015 WL 12516794, at *7 (E.D. Va. June 3, 2015) (“[The plaintiffs’] theory of implied disparagement does not fit within the plain and ordinary meaning of ‘disparage.”’); Vogue Int’l, LLC v. Hartford Cas. Ins. Co., No. CV-14-3570-PA (MRWx), 2014 WL 12534972, at *3 (C.D. Cal. Aug. 14, 2014) (inaccurately describing a product as “organic” is not indirect disparagement), appeal dismissed by 684 F. App’x 643 (9th Cir. 2017).

39. 627 S.W.3d 96 (Mo. Ct. App. 2021), reh’g denied (June 1, 2021), transfer denied (Aug. 31, 2021).

40. Id. at 107.

41. Id. at 108 (citing McCormack Baron Mgmt. Servs., Inc. v. Am. Guar. & Liab. Ins. Co., 989 S.W.2d 168, 171 (Mo. 1999) (en banc)).

42. Id. at 111.

43. Id. at 110–11 (citing McCormack, 989 S.W.2d at 171–72).

44. Id. at 108 (citing McCormack, 989 S.W.2d at 171).

45. Under Missouri law, the duty to defend is examined based on the eight corners of the documents and facts that the insurer could have learned from reasonable investigation. Allen v. Cont’l W. Ins. Co., 436 S.W.3d 548, 552 (Mo. 2014) (en banc).

46. McCormack, 989 S.W.2d 168.

47. Id. at 171.

48. Id.

49. Id. at 169–70.

50. Select Design, Ltd. v. Union Mut. Fire Ins. Co., 674 A.2d 798, 804 (Vt. 1996).

51. Id.

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David A. Gauntlett

Gauntlett & Associates

David A. Gauntlett is the principal of Gauntlett & Associates, where he represents policyholders in insurance coverage disputes regarding intellectual property, antitrust, and business tort claims.

Diane Bucci

Hurwitz & Fine, P.C.

Diane Bucci is a member of Hurwitz & Fine, P.C., where she represents insurance companies in a broad range of liability coverage issues.