When it comes to securing proper coverage, the topics of false advertising, mislabeling, and trademark infringement are notoriously gray areas for dietary supplement and CBD business owners.

Unfortunately, insurance oversight with any of these risks can be incredibly costly, so it’s important that you understand which policies can adequately protect your business—and to what extent.

To start, many businesses tend to rely on any and all lawsuits being “covered” under their General Liability policy. As outlined below, that is a large and rather universal misconception.

When it comes to coverage in the nutraceuticals industry, businesses must also consider Product Recall and Contamination Insurance along with a Cyber Insurance policy to help provide economic relief in the event of label or claim issues.

False Advertising, Mislabeling, & How it Affects Your Business
As a business owner, you might find yourself in a position where a customer finds a label discrepancy on one of your products.

For example, they purchase an item and submit it to a laboratory for testing to confirm accuracy. Even the most miniscule variation can result in legal action, claiming deceptive, unlawful behavior and false advertising. Many are shocked to find out that neither their general liability policy nor personal and advertising liability coverage protect them from this type of claim.

Understanding General Liability
Commercial general liability policies primarily protect from bodily injury caused by your product. For instance, if a customer became sick after ingesting your product, your general liability coverage would adequately protect you from any financial burden.

Another common occurrence is when traces of nut are found in an advertised “nut-free” product, resulting in a customer having an allergic reaction. Because of the “bodily harm” incurred by the customer, your business will also be protected.

However, when most label discrepancies and false advertising claims arise, bodily injury is likely not reported. In fact, in the vast majority of cases, label discrepancies aren’t linked to bodily injury, and as a result, businesses are held completely financially liable.

Personal Advertising & Injury Liability Coverage May Protect You
Are these harmless label discrepancies covered by personal and advertising injury liability coverage? The answer, unfortunately, is no. Business owners often feel misled by their insurance providers when it comes to the murky waters of this kind of policy. Because of the many exclusions associated, it’s important to have a general understanding of what may or may not be covered.

Personal and advertising injury liability coverage, which can be found within your general liability policy, contains explicit exclusions for:

• Quality and performance of goods (failure to conform to statements);
• Infringement of copyright, patent, trademark, or trade secrets; incorrect price descriptions;
• And the unauthorized use of another’s name or product.

Even with this kind of coverage, injury must be associated with the false advertisement of a product.

Explicitly stated, personal and advertising injury liability coverage means coverage from injury arising from situations like:

• False arrest, detention, or imprisonment; malicious prosecution;
• Wrongful eviction or wrongful entry into private property;
• And infringing upon another’s copyright, trade dress, or slogan in your advertisement, etc.

The Bottom Line
Simply put, nowhere in commercial general liability coverage or personal and advertising injury liability coverage is there language to indicate a carrier will defend for letters claiming mislabeling or trademark infringement, due to the fact that bodily injury is rarely associated with the claim.

Your insurance provider should be transparent in order to avoid further confusion and potential undue burden. If you’re struggling with this and looking for a straightforward, transparent approach to your business’s commercial general liability coverage, please contact me.

And please remember that the information provided in this article is intended for informational purposes. Ultimately, coverage determination will be up to your insurance carrier to decide.

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Chris Morey is associate vice president at Bolton & Company. He is a Certified Sports Nutritionist who focuses on the needs of clients within Bolton’s Dietary Supplement Practice Group. With more than seven years of customer service experience, Morey looks to find the right insurance solutions for his clients in the Health and Fitness industries. With a substantial focus on the supplement industry and all parts of the supply chain, he also strives to serve the hemp and CBD product space as the insurance industry continues to fluctuate and evolve. Prior to joining Bolton in 2015, Morey worked for Nutrishop USA. He holds a Bachelors of Arts in Business Administration from Azusa Pacific University. He can be contacted at cmorey@boltonco.com.