Antitrust Exclusion Applies to Claims for Unjust Enrichment and Violation of Consumer Protection Laws

Applying California law, the United States District Court for the Eastern District of California has held that an antitrust exclusion in a D&O policy bars coverage for lawsuits alleging violation of antitrust laws, violation of consumer protection and unfair competition laws, and unjust enrichment. Beazley Ins. Co. v. Foster Poultry Farms, 2024 WL 3904994 (E.D. Cal. Aug. 22, 2024). The court also concluded that payments by the insured in excess of amounts paid by the primary carrier pursuant to a settlement agreement with the insured did not erode the primary policy under an excess carrier’s policy language.

Several actions were filed against the insured, a chicken producer, and other chicken producers alleging that they illegally conspired to fix prices. In addition to violations of antitrust laws, the underlying plaintiffs alleged violations of state consumer protection and unfair competition laws and unjust enrichment.

The insured sought coverage for the lawsuits under primary and excess D&O policies. Both carriers denied coverage based on an antitrust exclusion in the primary policy, which excluded coverage for “any actual or alleged violation of any law, whether statutory, regulatory or common law, respecting any of the following activities: antitrust, business competition, unfair trade practices or tortious interference in another’s business or contractual relationships.” The primary carrier, however, agreed to pay a portion of the insured’s defense costs for the unjust enrichment claims pursuant to a settlement agreement with the insured.

The excess carrier filed an action for declaratory judgment, asserting that it was not obligated to pay the insured’s defense costs because the antitrust exclusion applied to the lawsuits in their entirety. The excess carrier argued in the alternative that payments made by the insured in excess of the amounts paid by the primary carrier pursuant to the settlement did not exhaust the primary policy’s limit. In response, the insured argued that the excess carrier had a duty to advance defense costs because the unjust enrichment claims and state consumer protection law claims were not “respecting” antitrust, business competition, unfair trade practices, or tortious interference pursuant to the exclusion and that the primary policy had been properly exhausted.

The court agreed with the excess carrier. First, the court held that the antitrust exclusion was unambiguous and wholly excluded coverage because the unjust enrichment and consumer protection law claims were derivative of, and entirely dependent upon, the antitrust claims and the price-fixing allegations. Second, the court found that payments by the insured in excess of the settlement payment by the primary carrier had not fully exhausted the primary policy’s limits. The excess policy provided that coverage attaches only after all of the primary policy’s limits “have been exhausted through payments by, or on behalf of, or in place of” the primary carrier “of amounts covered under [the primary policy].” The court held that, because the primary carrier was no longer obligated to defend or indemnify the insured pursuant to the terms of the settlement agreement, any payments made by the insured above that amount were not “amounts covered” “on behalf of” or “in place of” the primary carrier.