(Article from Insurance Law Alert, December 2020)
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A Missouri federal district court ruled that a cereal manufacturer was not entitled to general liability coverage for class action claims alleging consumer fraud based on the company’s alleged practice of misrepresenting high-sugar content cereals as “healthy.” Post Holdings, Inc. v. Liberty Mutual Fire Ins. Co., 2020 WL 6381817 (E.D. Mo. Oct. 30, 2020).
A putative class action suit alleged violations of California statutory law, and express and implied warranties based on the company’s alleged “policy and practice of labeling high-sugar cereals . . . with various health and wellness claims that suggest the cereals are healthy, when they are not.” The complaint further alleges that the sugar content in the cereals is “highly likely to contribute” to “increased risk for, and actual contraction of, chronic disease.” Plaintiffs therefore claim that they suffered bodily injury “in the form of increased risk” of certain illnesses. The insurer denied coverage based on a lack of “bodily injury,” defined by the policy as “sickness or disease sustained by a person, including death resulting from any of these at any time; and [m]ental anguish, shock or humiliation arising out of the bodily injury.”
The court granted the insurer’s summary judgment motion, ruling that “[a]lthough the . . . Suit contains references to ‘bodily injury,’ upon analysis, it is abundantly clear that no ‘bodily injury’ is alleged to have been sustained by the . . . plaintiffs.” The court explained that allegations of possible harm do not constitute causes of action for bodily injury absent actual adverse effects sustained by the plaintiffs. In addition, the court ruled that emotional damages are not covered unless they result from actual physical injury.