Policy Heading Does Not Limit Scope of Antitrust Exclusion
Insurance Law Update
U.S. Court of Appeals for the First Circuit
In Welch Foods, Inc. v. National Union Fire Ins. Co. of Pittsburgh, PA, 659 F.3d 191, (1st Cir. (Mass.) Oct. 24, 2011), the U.S. Court of Appeals for the First Circuit upheld the District Court's ruling that National Union owed no duty to defend or indemnify Welch for two underlying deceptive trade practices lawsuits.
A market competitor of Welch and a group of consumers brought separate suits against Welch alleging deceptive trade practices, false and misleading advertising, and deceptive labeling on one of Welch's juice products. National Union, Welch's general liability insurer, denied coverage based on a provision with the heading "ANTITRUST EXCLUSION," which stated in part: "The Insurer shall not be made liable to make any payment for Loss in connection with a Claim made against the insured: alleging [or arising out of] antitrust violations, price fixing, price discriminations, unfair competition, deceptive trade practices and/or monopolies, including actions, proceedings, claims or investigations thereto ..."
Following National Union's denial, Welch brought a declaratory judgment action. Welch contended that the "antitrust" exclusion in the National Union policy should be construed to apply solely to antitrust violations. Welch contended that the wording of the heading compelled such an interpretation, as did the principle of construction of noscitur a sociis – "known from its associates" – according to which written terms must be interpreted in accordance with the words surrounding them, because of the numerous use of antitrust terminology in the exclusion.
The District Court found that there was no coverage due to the "antitrust" exclusion, and the First Circuit affirmed. The court held that no weight could be given to the "antitrust" language of the heading because the policy expressly stated that its headings "form no part of the definition of the scope [of coverage]." The court also found that the plain language of the excluded claims, particularly "unfair competition" and "deceptive trade practices," showed that the exclusion was not limited to just antitrust claims. Finally, the court noted that the doctrine of noscitur a sociis "cannot be used to overrule the plain meaning" of a policy's terms or to "create uncertainty in an otherwise unambiguous term."