No “Accident,” No Coverage: Utah Federal Court Rejects Defense for Toxic Jewelry Claims
The U.S. District Court for the District of Utah, applying Utah law, has held that a liability insurer owed no duty to defend toxic exposure and misrepresentation claims under a commercial general liability policy, umbrella policy, or employment practices liability endorsement because the alleged injuries were not caused by an “occurrence” or “incident” and did not arise from “employment-related” acts. Auto-Owners Ins. v. Paparazzi, 2026 WL 885485 (D. Utah Mar. 31, 2026). The court further ruled that, despite the absence of a duty to defend, the insurer could not recover defense costs because the policies contained no express reimbursement provision.
The dispute arose from multiple underlying proceedings brought by consultants and consumers against the insured jewelry company alleging that the company marketed its jewelry as lead- and nickel-free when, in fact, testing showed, and the company was aware that, the products contained dangerous levels of toxic metals. The claimants sought damages for economic loss, reputational harm, corrective advertising, and, in some cases, personal injury. The insured tendered the claims under its commercial general liability policy, an umbrella policy, and an employment practices liability endorsement. The insurer agreed to defend under a reservation of rights and later sought a declaration that it owed no duty to defend or indemnify and was entitled to reimbursement of defense costs.
The primary policy provided defense and indemnity only for damages because of “bodily injury” or “property damage” caused by an “occurrence,” defined as an “accident.” The umbrella policy similarly required an “incident,” defined as an accident, as the basis for coverage. The employment practices endorsement applied to “wrongful employment acts,” including “employment-related misrepresentation(s)” directed at an employee or applicant.
The district court held that the alleged bodily injuries were not caused by an “accident” when the company allegedly knew that its products contained toxic materials and disregarded the risks because, under Utah law, injuries are not accidental when they are the natural and probable consequence of the insured’s conduct. The court also rejected coverage under the employment practices endorsement, finding that alleged misrepresentations regarding product safety were not “employment-related.” Interpreting that term narrowly, the court explained that it referred to matters directly concerning the employment relationship, such as compensation, discipline, or promotion, but not product advertising made to the public at large, even if employees were among the recipients.
Finally, relying on Utah Supreme Court precedent, the district court denied the insurer’s request for reimbursement of defense costs it had already paid, concluding that reimbursement was not available in the absence of an express policy provision permitting such recoupment.
