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Trouble in Paradise: Sixth Circuit Finds No Liability Coverage for Fake Kona Coffee Suit

Insurance Coverage / June 2, 2023

In L&K Coffee, LLC v LM Ins Corp, et al., unpublished opinion of the U.S. Court of Appeals for the Sixth Circuit, issued June 1, 2023 (Docket No. 22-1727), the panel – applying Michigan law in diversity – found that a false advertising suit, based on the insured’s representation that its coffee was from the Kona region of Hawai’i, did not trigger the insurers’ duty to defend or indemnify.

The decision underscores that although the duty to defend is broader than the duty to indemnify, “[t]he duty to defend is related to the duty to indemnify in that it arises only with respect to insurance afforded by the policy.” American Bumper & Mfg Co v Hartford Fire Ins Co, 452 Mich 440, 450 (1996). “If the policy does not apply, there is no duty to defend.” Id.

The case turned on the definition of “personal and advertising injury” and specifically, whether the false advertising suit alleged “injury … arising out of” (1) a publication that “disparages a person’s or organization’s goods, products or services,” or (2) “infringing upon another’s … slogan in your advertisement.”

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