Kona Coffee Must be From the Big Island of Hawaii
Barry Zalma
Jun 13, 2023
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L&K Coffee claimed its various insurance companies erroneously denied coverage to defend it against a Lanham Act false-advertising lawsuit brought by Hawaiian coffee growers. The district court concluded the applicable insurance policies did not obligate a defense and entered summary judgment in the insurance companies’ favor.
In L&K Coffee LLC, dba Magnum Roastery; Kevin Kihnke v. LM Insurance Corporation; Liberty Insurance Corporation; Selective Way Insurance Company; Valley Forge Insurance Company; Continental Casualty Company, No. 22-1727, United States Court of Appeals, Sixth Circuit (June 1, 2023) the Sixth Circuit resolved the coverage dispute.
FACTS
L&K Coffee, LLC, a Michigan-based company, roasts and sells coffee products throughout the United States. Defendants are insurance companies from whom L&K purchased general commercial liability and umbrella insurance policies.
Coffee growers from the Kona region of the Island of Hawai’i sued L&K and other coffee companies for “false designation of origin, false advertising, and unfair competition” in violation of the Lanham Act, 15 U.S.C. § 1125(a), in the Western District of Washington. These “Kona Plaintiffs” alleged that the defendants falsely designated the origin of the coffee they branded and distributed as “Kona” coffee “when most of the coffee beans contained in the coffee products were sourced from other regions of the world.”
The Kona Plaintiffs’ operative complaint summarized their contentions as to L&K as follows: “L&K falsely designates the geographic origin of its “Kona” coffee products with the prominent placement of KONA on the front of the packaging.”
The deceptive marketing was alleged to be designed to mislead consumers into believing that L&K’s Magnum Exotics “Kona” products contain coffee from the Kona District, when the coffee products actually do not contain a significant amount of Kona coffee, if any. The plaintiffs also alleged that L&K deliberately misled the consumer into believing that L&K’s Magnum Exotics coffee products contain significant amounts of premium Kona coffee beans in order to justify the high price L&K charges for what is actually ordinary commodity coffee.
L&K asked the insurance companies to defend and indemnify them in that matter under the policies’ “personal and advertising injury” coverage. Personal and advertising injury, in pertinent part, is defined as an “injury . . . arising out of” (1) a publication that “disparages a person’s or organization’s goods, products or services,” or (2) “[i]nfringing upon another’s . . . slogan in your advertisement.” Based on this language and the Kona Plaintiffs’ allegations, the insurance companies denied coverage because, as one insurer put it, “none of the offenses in the definition of ‘personal and advertising injury’ include false advertising, and none of the allegations in the complaint fall within any of the offenses in the definition.”
ANALYSIS
The duty of an insurance company to provide a defense depends upon the allegations in the complaint and extends to allegations which even arguably come within the policy coverage. An insurer’s duty to defend does not depend solely upon the terminology used in a plaintiff’s pleadings. Rather, it is necessary to focus on the basis for the injury and not the nomenclature of the underlying claim in order to determine whether coverage exists.
The term “disparage” means an untrue statement directed towards another’s property. A disparagement claim requires a company to make false, derogatory, or disparaging communications about a competitor’s product.” (emphasis in the opinion)
The Kona Plaintiffs alleged L&K violated the Lanham Act’s prohibition on false designation of one’s own product. See 15 U.S.C. § 1125(a)(1). The Sixth Circuit concluded that this is not “disparagement.”
Upon review of the Kona Plaintiffs’ complaint, the Sixth Circuit Court agreed with the district court that the complaint does not set forth an arguable theory of recovery. In the Kona Plaintiffs’ own words, “only coffee grown on farms located within the Kona District of the Big Island of Hawaii . . . can be truthfully marketed, labeled, and sold as Kona coffee.” L&K violated the false designation of its product and that was not a covered cause of loss.
ZALMA OPINION
It never pays to lie to your customers. When doing so harms someone else you are subject to damages from those your lie harms. By falsely designating its product of “Kona” coffee when L&K claimed its cheap, generic coffee was “Kona” Coffee it was involved in a tort that was not covered by the policies of insurance.
(c) 2023 Barry Zalma & ClaimSchool, Inc.
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Barry Zalma, Esq., CFE, is available at http://www.zalma.com and [email protected]
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Happy Law Day
ZIFL – Volume 30, Issue 9 – May 1, 2026
Read the full article at https://www.linkedin.com/pulse/zalmas-insurance-fraud-letter-may-1-2026-barry-zalma-esq-cfe-2tywc, see the video at at and at https://zalma.com/blog plus more than 5300 posts.
THE SOURCE FOR THE INSURANCE FRAUD PROFESSIONAL
ZIFL – Volume 30, Issue 9 – May 1, 2026
Zalma’s Insurance Fraud Letter (ZIFL) continues its 30th year of publication dedicated to those involved in reducing the effect of insurance fraud. ZIFL is published 24 times a year and is written by Barry Zalma.
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In American Abalone Farms, LLC v. Star Insurance Company et al., H052643, California Court of Appeals, Sixth District (April 27, 2026) the Court of Appeals dealt with an insurance coverage issue that required application of the efficient proximate cause doctrine.
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American Abalone Farms, LLC ("American Abalone" ) operates an aquaculture farm in Santa Cruz County, California, raising abalone in tanks. In August 2020, the CZU Lightning Complex Fires led to a prolonged power outage and road closures near the farm. As a result, the farm’s water pumps failed, causing the death of most of the ...
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In United Services Automobile Association and State Farm Mutual Automobile Insurance Company v. Anthony Wenzell, 2026 CO 25 (Colo. Apr. 27, 2026) Anthony Wenzell was rear-ended in a car accident. He had a significant prior 2014 accident that required back surgery.
Wenzell claimed underinsured-motorist (UIM) benefits under three policies: (1) the tortfeasor’s liability policy, (2) his own primary UIM policy with State Farm, and (3) an excess UIM policy issued by USAA (under his brother’s policy, which contained an “other insurance” clause making USAA’s coverage excess over any collectible insurance).
After receiving the claims, both USAA and State Farm repeatedly requested that Wenzell execute comprehensive medical-release authorizations so they could obtain his full medical records and ...
It is Fraud to Make the Same Claim Twice
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Chutzpah: After Being Paid for a New Roof Insured Makes Second Claim For Same Damages
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No One is Entitled to be Paid for the Same Loss Twice
In Mohammed Ali Khalili v. State Farm Lloyds, No. 14-25-00611-CV, Court of Appeals of Texas (April 30, 2026) Khalili maintained a State Farm Lloyds homeowners insurance policy for decades. In 2008 he filed a roof-damage claim; State Farm paid him to replace the entire roof (shingles and gutters). Khalili never replaced the roof and repeated his claim.
BACKGROUND
In 2021 he filed a second roof claim. State Farm’s inspectors found the roof “very old” with extensive non-storm-related damage. The claim was denied because (1) the damage did not exceed the deductible and (2) State Farm had already paid for a full roof replacement.
PROCEDURAL HISTORY
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It is Fraud to Make the Same Claim Twice
Read the full article at https://www.linkedin.com/pulse/fraud-make-same-claim-twice-barry-zalma-esq-cfe-c4g8c and at https://zalma.com/blog.
Chutzpah: After Being Paid for a New Roof Insured Makes Second Claim For Same Damages
Post number 5347
No One is Entitled to be Paid for the Same Loss Twice
In Mohammed Ali Khalili v. State Farm Lloyds, No. 14-25-00611-CV, Court of Appeals of Texas (April 30, 2026) Khalili maintained a State Farm Lloyds homeowners insurance policy for decades. In 2008 he filed a roof-damage claim; State Farm paid him to replace the entire roof (shingles and gutters). Khalili never replaced the roof and repeated his claim.
BACKGROUND
In 2021 he filed a second roof claim. State Farm’s inspectors found the roof “very old” with extensive non-storm-related damage. The claim was denied because (1) the damage did not exceed the deductible and (2) State Farm had already paid for a full roof replacement.
PROCEDURAL HISTORY
State Farm filed motion for summary...
What Must be Done after Notice of a Claim is Received by the Insurer
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A first party property policy does not insure property: it insures a person, partnership, corporation or other entity against the risk of loss of the property. Before an insured can make a claim for indemnity under a policy of first party property insurance the insured must prove that there was damage to property the risk of loss of which was insured by the policy. The obligation imposed on the insured ...
