Sixth Circuit Finds Umbrella Insurers Owe No Duty to Defend Against Antitrust Claims
On April 14, 2008, the Sixth Circuit applying Illinois law ruled that six umbrella insurers owed no duty under their advertising or personal injury coverages to defend or indemnify an insured accused of monopolizing the synthetic thyroid market. The gravamen of the complaints against the insured was that its wrongful monopoly of the synthetic thyroid market caused consumers and health insurers to have to pay higher prices for its product, Synthroid, and kept them from being able to buy lower-cost, equally effective alternatives. The complaints alleged the insured asserted monopoly control by suppressing a physician’s study critical of Synthroid, criticizing her methodology and results, concealing known facts about it and marketing it as a uniquely superior drug despite knowing it was not. The complaints sought economic damages for consumers and health insurers who overpaid for Synthroid. They did not seek damages on behalf of competing thyroid manufacturers and they did not allege defamation, libel, disparagement, or slander.
The district court had earlier ruled the primary insurers owed a duty to defend the insured, reasoning that the plaintiffs' claims "may have had their origin in slander, libel, or disparagement," which fell under the policy definition of advertising injury. The district court explained that while the underlying complaints did not allege libel, slander, or disparagement, the litigation "grew out of various disparaging, defamatory, and libelous statements," such as the insured’s claims that Synthroid was superior to other thyroid drugs and its criticism of the physician’s study questioning the insured’s claims about Synthroid. The primary insurers appealed but settled while the appeal was pending. Relying on its earlier decision, the district court ruled the umbrella insurers owed a duty to defend. Reversing, the Sixth Circuit found the allegations in the underlying complaints insufficient to sketch a claim for the common-law offenses of libel, slander, or disparagement, which in Illinois all required that a false statement be made about the plaintiff. The underlying complaints did not allege the insured made a false statement about the plaintiff class. Instead, the underlying plaintiffs sought economic damages only for the injuries they suffered from the artificially high prices for Synthroid which stemmed from the insured’s monopolization and fraudulent concealment – a paradigmatic antitrust injury. Finally, the Sixth Circuit found it extremely unlikely the parties intended antitrust and racketeering claims to be covered by policy definitions for libel, slander, and disparagement.
