Accountability and Overhyped Advertising Claims

We’ve heard it from advertisers for years: using a specific product will make you look younger, feel happier, express more confidence, __________________(you fill in the blank)…

But some recent cases have caused advertisers to be more cautious about stating what their products will do.

Example #1: in September, Reebok agreed to pay $25 million in customer refunds to settle charges by the U.S. Federal Trade Commission regarding Reebok’s claim that EasyTone shoes would assist wearers in muscle toning and posture improvement.

According to the FTC complaint, Reebok falsely claimed benefits that could not be scientifically supported.

Example #2: Dean Foods is a giant U.S. food manufacturer, supplying dairy products to large retail and restaurant chains, including McDonalds.

Dean’s marketing made specific claims linked to good health resulting from the use of its products.  But a class action complaint was filed in Illinois earlier this month, alleging that Dean’s claims are not supported scientifically and, therefore, misleading to consumers.  (This allegation has not yet been proven in court.)

These incidents have Canadian manufacturers reacting – and one question is whether their General Liability (GL) policy will protect them against such allegations.

Generally, the answer is no.  GL policies deal with allegations of bodily injury, personal injury and property damage; therefore, overhyped claims that are shown to be false are not covered.  (Some limited coverage may be found under personal and advertising injury liability extensions.)

However, in the Reebok issue, some customers are claiming that rather than assisting their physical well-being, the product actually contributed to injuries.  Depending on the circumstances, such injuries may very well fall under the scope of coverage provided by a GL.

Again, the advice of a knowledgeable broker is essential to managing risk.

Tags: advertising, broker, claims, coverage, damage, dean foods, easytone, insurance, Liability, reebok, risk, safety