Misrepresenting the source of coffee beans is not disparaging, a federal appeals court ruled Thursday, upholding a lower court ruling in favor of a group of insurers, including units of Liberty Mutual Insurance Group, in a coverage dispute.
Nunica, Michigan-based L&K Coffee LLC, which roasts and sells coffee, was sued along with other coffee companies for “false designation of origin, false advertising and unfair competition” in violation of the federal Lanham Act by coffee growers in Hawaii’s Kona region, according to the ruling by the 6th U.S. Circuit Court of Appeals at Cincinnati i 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 alleged that the defendants had misrepresented the origin of their coffee as Kona, when most of the coffee beans in their products came from other regions of the world.
L&K asked its insurers to defend and indemnify it under their policies̵7; “personal and advertising injury” coverage and sued them in US District Court in Grand Rapids, Michigan, when they refused to do so.
The district court ruled in favor of the insurance companies and was upheld by a three-judge appeals body.
L&K argued that the insurers were required to defend it under the defamation and slogan infringement components of its policies’ personal and advertising claims coverage.
However, the panel’s decision noted that the word “disparaging” does not appear in the plaintiffs’ complaint. The gist of the complaint is that L&K falsely claimed its coffee source was the Kona region.
“However, this is not ‘derogatory’ under Michigan law and therefore under the contract,” the ruling said.
L&K attorney Gregory M. Hatton of Hatton Petrie & Stackler APC in Aliso Viejo, Calif., issued a statement saying in part, “I do not agree that any Kona farmer was harmed by any of the labeling issues in the underlying case. But this was a duty to defend case, and the allegations are what drive the carrier’s duty to defend. The fact that the allegations are frivolous is irrelevant to the duty to defend.”
Lawyers for the insurers did not respond to requests for comment.