7th Circuit Addresses Coverage for Alleged Antitrust Violation

In its recent decision Rose Acre Farms, Inc. v. Columbia Casualty Co., 2011 U.S. App. LEXIS 22063 (7^th Cir. Nov. 1, 2011), the United States Court of Appeals for the Seventh Circuit, applying Indiana law, had occasion to consider whether an insured was entitled to coverage under its general liability policies for alleged conspiracy to price fix.

The insured, Rose Acre, is one of the nation’s largest producers of eggs and was named as a defendant in a class action alleging violations of the Sherman Act for conspiracy to fix the price of eggs.  Rose Acre sought coverage under its general liability policies’ “personal and advertising injury” coverage for the offense of “use of another’s advertising idea in your ‘advertisement.’”  Specifically, Rose Acre claimed that it belonged to a trade association of egg producers that maintained a website advertising the benefits of free range chickens, which Rose Acre argued could be used to make customers believe that the high price of eggs “was the result not of a conspiracy among egg producers but instead of the chickens’ healthful and humane living conditions.”

Judge Posner, writing the opinion for the court, characterized Rose Acre’s theory as “convoluted,” particularly since the underlying suit contained no mention of Rose Acre’s advertising on any website.  More significantly, Judge Posner explained that even if the underlying suit could be read to allege that advertising was used as part of the antitrust conspiracy, the policies provided coverage only for the offense of misappropriation of another’s advertising idea.  That is the essence of an advertising injury, which the court explained, was not alleged in the underlying suit.  Rather, the underlying suit related to an alleged antitrust violation, which as Judge Posner wrote, is not within the contemplated coverage of a general liability policy:

Antitrust liability … is a major business risk, especially for one of the largest companies in a major market.  It is hardly likely that parties to an insurance contract would seek to cover such a serious risk indirectly through an “advertising injury” provision aimed at misappropriation and other intellectual-property torts.

Judge Posner further noted that the policies’ personal and advertising injury coverage contained exclusions applicable to knowing and criminal conduct, both of which necessarily are present in an alleged conspiracy to violate federal antitrust law.