In Cincinnati Insurance Company v. KT Health Holdings, LLC et al. (D. Mass. Mar. 27, 2017), a Massachusetts federal district court held that an insurer had no duty to defend or indemnify its insureds, finding that allegations by a putative class that the insureds falsely advertised their product did not trigger bodily injury coverage under a CGL policy.
As background, the defendants, KT Health Holdings and KT Health (collectively “KT”), manufacture and sell KT Tape for sports and fitness activities. The defendants advertise KT Tape as a way to prevent injury and alleviate pain during exercise. Alexander Vuckovic initiated the underlying class action suit against KT, alleging on behalf of a putative class unjust enrichment, untrue and misleading advertising, and unfair and deceptive practices. The class claims generally maintained that the KT Tape failed to work as advertised and that Class members had paid a premium price for a product that did not perform as advertised. Vuckovic added an individual claim for alleged injuries he suffered when the KT Tape caused part of his skin to become red and irritated.
The plaintiff, KT’s insurer, agreed to defend KT under a reservation of rights based on the individual claim. However, the insurer maintained that the putative class failed to seek damages for bodily injury.
The plaintiff moved for partial summary judgment on coverage for the putative class’ claims. KT argued that those claims set forth “bodily injury,” as the false advertising concerned the KT Tape’s pain-relieving and injury-preventing qualities. The district court rejected that argument because the allegations focused on the economic harm of having paid a premium price for something that did not work as advertised, not that the class members, besides Vuckovic, experienced any pain or physical injury while wearing the tape. Thus, the district court held that the complaint did not allege direct harm to the putative class members because of “bodily injury.” The district court reasoned that the putative class’ causes of action, alleging unfair and deceptive practices and unjust enrichment, required proof of economic harm – not physical injury.
KT then argued that even if the complaint lacked any direct allegation of bodily injury caused by the tape, the complaint implicated bodily injury by inference. Essentially, KT argued that if they made false claims to consumers that the tape prevented pain and injury during exercise, the implication was that the users experienced injuries and pain while using the tape, and thus, sustained personal injuries. The district court also rejected this argument, holding that the class claims for economic injury arising out of their having paid premium prices for products that failed to perform as advertised did not seek damages caused by “bodily injury.”
This decision illuminates the limits of an insurer’s duty to defend pseudo-“bodily injury” claims where there is no alleged physical harm to the claimant, as such attenuated claims are not covered under standard CGL policies.