"Unfair Trade Practices" Exclusion Does Not Extend to Consumer Protection Claims.

• Author: Mccutcheon, Mary
• Position: [GUEST ARTICLE]

* Two phrases combined in a single exclusion--"alleging, arising out of, based upon or attributable to any violation of any law..." and "as respects... unfair trade practices" could inspire carriers to make trouble for policyholders seeking coverage for consumer protection claims. Fortunately, a recent federal decision recognizes that California rules of policy construction limit the scope of this exclusion, in line with a policyholder's reasonable expectations of coverage.

In James River Ins. Co. v. Rawlings Sporting Goods Co. Inc., Case No. CV 19-6658-GW-MAAx 2021 WL 346418 (CD. Cal., January 25, 2021), the district court was called upon to decide whether this exclusion barred coverage for claims that Rawlings misrepresented the weights of its baseball bats on their labeling. The consumers brought these claims in a class action complaint, seeking relief under the following California statutes: (1) Unfair Competition Law, Cal. Bus. & Prof. Code [section] 17200 et seq.; (2) False Advertising Law, Cal. Bus. & Prof. Code [section] 17500 et seq.; and (3) Consumer Legal Remedies Act, Cal. Civ. Code [section] 1750 et seq. There was no question that the claim fell within the coverage for wrongful acts, but Rawlings' directors and officers liability insurer, Starr, denied coverage under an "Anti-Trust Exclusion," which stated:

This policy shall not cover any Loss in connection with any Claim alleging, arising out of, based upon or attributable to any violation of any law, whether statutory, regulatory or common, as respects any of the following: anti-trust, business competition, unfair trade practices or tortious interference in another's business or contractual relationships; provided, however, that this exclusion shall apply only to the Company.

The district court started with the principle that, in interpreting an insurance policy, a court "must give effect to the mutual intention of the parties" and, where possible, to infer such intent "solely from the written provisions of the contract." (citing E.M.M.I. Inc. v. Zurich Am. Ins. Co., 32 Cal.4th 465,470 (2004)). Starr argued that because consumer protection statutes contained similar language, the claims alleged were "clearly" within the exclusion. The court did not agree. The court noted, the key phrase "unfair trade practices" was not defined in the Starr policies, so it was not "clear" that it was Starr's intent to exclude consumer protection claims.

In support of its denial of coverage...