U.S. Seventh Circuit - The FindLaw 7th Circuit Court of Appeals Opinion Summaries Blog

Rose Acre Chickens Out of Commercial General Liability Indemnity

A commercial general liability policy may cover patent infringement defense in some jurisdictions, but it does not cover a price-fixing case defense in the Seventh Circuit Court of Appeals.

Rose Acre, the nation's second-largest producer of eggs, was charged with conspiring to fix the price of eggs in violation of the Sherman Act. Rose Acre asked its liability insurers to defend it in the class action suits, arguing that the complaints sought damages for what Rose Acre's policies called "personal and advertising injury."

The commercial general liability insurers, Columbia Casualty Company and National Fire Insurance Company of Hartford (collectively, Insurers), refused to defend Rose Acre on the ground that the antitrust complaint alleged nothing that could be regarded as a personal and advertising injury.

The Seventh Circuit Court of Appeals agreed with the Insurers.

Rose Acre argued that the price-fixing case fell within its advertising injury coverage: the company's website states that Rose Acre eggs are more expensive because its chickens are kept in a warm, friendly, free-range environment.

The Seventh Circuit said the free-range chicken-happiness was irrelevant because it was "not alleged in any of the 353 paragraphs of the antitrust complaint." Instead, the complaint alleged that Rose Acre had conspired with the United Egg Producers to reduce supply and fix prices of caged eggs.

As Judge Richard Posner noted in the court's opinion, Rose Acre's website does not address whether chicken-happiness measures increase the cost of caged eggs, so there's only a "faint implication that all Rose Acre's eggs are more expensive than they would be if the company did not give more weight to its chickens' mobility and social opportunities than to the cost of their eggs."

In other words, chicken-happiness matters, but not when determining insurance liability in a Sherman Act claim.

The case is bad news for companies accused of Sherman Act violations; your defense costs, unfortunately, will be out of pocket in the Seventh Circuit.

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