In substance, the class claims alleged that KT Tape had not worked as advertised. The complaint alleged that KTH and KTHH's statements in advertisements, use of photographs of Olympic athletes wearing KT Tape, and other marketing practices had created the impression that KT Tape relieved pain and prevented injury during exercise.

The complaint further alleged that those claims were “not supported by scientific evidence” and were “not accepted by the medical community.” It stated that KTH and KTHH's “creative and aggressive marketing efforts” were “the only reason” that they had been able “to sell so much of this product at premium prices” and that consumers including Mr. Vuckovic had “paid a premium price” for a product that did “not perform as claimed and advertised.”

KTH and KTHH notified the Cincinnati Insurance Company, which had issued a CGL insurance policy in their favor, of Mr. Vuckovic's complaint.

Cincinnati went to court seeking a declaratory judgment that the class claims did not seek damages for bodily injury and, therefore, were outside the scope of coverage of the policy.

For their part, KTH and KTHH contended that Mr. Vuckovic's action implicated bodily injury because the advertising claims at issue concerned KT Tape's pain-relieving and injury-preventing qualities.

Cincinnati moved for summary judgment. 

The Cincinnati Insurance Policy

The Cincinnati Insurance policy provided that Cincinnati would pay:

those sums that the insured becomes legally obligated to pay as damages because of “bodily injury” or “property damage” to which this insurance applies. We will have the right and duty to defend the insured against any “suit” seeking those damages. However, we will have no duty to defend the insured against any “suit” seeking damages for “bodily injury” or “property damage” to which this insurance does not apply….

It defined:

bodily injury

as:

bodily injury, sickness or disease sustained by a person, including death resulting from any of these. 

The district court granted the motion, ruling that Mr. Vuckovic's complaint did not allege direct harm to the class plaintiffs “because of bodily injury.”

In its decision, the district court explained that, in essence, the class claims alleged that KTH and KTHH had made false and misleading statements in advertising KT Tape, and that consumers had paid a premium for the KT Tape because of those statements. It pointed out that the only allegations of direct harm to the class members were contained in two paragraphs:

Plaintiff and the other members of the proposed Class have paid[ ] a price premium for KT Tape over traditional athletic tape. [KTH and KTHH] ha[ve] used deceptive claims regarding the purported benefits of KT tape to charge a premium approximately ten times the price of traditional athletic tape….

[KTH and KTHH's] false, deceptive and misleading representations about the pain-relieving and injury-treating properties of KT Tape were and are material; there would be no reason for a consumer to purchase a KT Tape Product and pay a premium price for it (over and above the price of traditional athletic tape) if not for the claims and representations about KT Tape's ability to relieve pain and treat a variety of injuries.

The district court found that those allegations focused on the “economic harm” of having paid a price premium for something that did not work as advertised. Moreover, it observed, under both of the class counts for money damages – unfair and deceptive practices in violation of Mass. Gen. Laws ch. 93A, § 2 and unjust enrichment – the essential harm that had to be shown was economic in nature. Both causes of action for damages, the district court said, sought economic relief, “as opposed to compensation for bodily injury.”

The district court was not persuaded by the argument that bodily injury was implicated in Mr. Vuckovic's complaint “by inference” – namely, that the allegedly false claims in KTH and KTHH's marketing materials suggested that users could avoid injury and pain by using KT Tape during exercise.

In the district court's opinion, the essence of the class allegations was that KTH and KTHH's marketing claims were false – not because class members actually had suffered bodily injury, but because they had not been proved valid by the available scientific evidence.

In sum, the district court concluded, the class allegations in Mr. Vuckovic's complaint did not allege a claim for bodily injury and, therefore, did not seek “damages because of 'bodily injury.'” Accordingly, there was no coverage under the Cincinnati policy for the claims asserted in the class action.

The case is Cincinnati Ins. Co. v. KT Health Holdings, LLC, No. 16-11722-FDS (D. Mass. March 27, 2017).

FC&S Legal Comment

Other courts also have held that class action lawsuits seeking compensation for the economic injury of having paid premium prices for products that allegedly had not performed as advertised did not allege damages “because of 'bodily injury'” under general liability insurance policies.

For example, in HPF, L.L.C. v. Gen. Star Indem. Co., 338 Ill. App. 3d 912 (2003), the insured herbal supplement manufacturer was a defendant in a class action alleging that it had made misleading claims in marketing materials that suggested that a supplement had “been proven safe and effective for the treatment of obesity.” The class plaintiffs in the underlying action sought disgorgement of profits and requested that the court order restitution to consumers who had purchased the product, as well as other equitable relief. The court found that “[d]espite [the insured's] characterization that the [class action] complaint generally allege[d] that [the supplement was] not safe,” there was not a “single allegation that [the insured's] herbal products caused bodily injury or even that they may cause bodily injury.”

Instead, the court found that “the essence of the … complaint [was] that [the insured] misrepresented that its herbal products were proven safe and effective for the treatment of obesity when, in fact, those products had not been so approved.”

See, also, Hypoguard USA, Inc. v. St. Paul Fire & Marine Ins. Co., No. A06-2215 (Minn. Ct.App. Dec. 4, 2007) (finding no coverage under general liability policy covering claims “for bodily injury” where complaint in an underlying class action asserted that but for the insured's concealment of certain facts, members of the class “would not have purchased [the insured's] blood glucose monitors or paid as much for the product as they did,” because the injury alleged was “the purchase price of [the insured's] products and is neither a bodily injury nor a personal injury within the meaning of the policy”).