Insurance company says it doesn't need to cover Templeton Rye's defense of deceptive marketing, consumer fraud lawsuits

An insurance company has asked a Cook County judge to declare it has no obligation to defend the owners of a supposed “craft whiskey” brand facing accusations they deceptively marketed their whiskey as being produced in Templeton, Iowa using a recipe preferred by Al Capone, even though it had always been purchased by the barrel from an Indiana-based mass distiller of whiskey sold under a number of brands in the U.S. and internationally.

On Nov. 24, Society Insurance, of Fond Du Lac, Wis., filed a complaint for declaratory judgment, asserting for a variety of reasons it should not be compelled to pay for against Templeton Rye Spirits’ defense against two potentially crippling lawsuits brought by a former Chicago area Templeton Rye fan and a Batavia, Ill. restaurant owner.

Primarily, however, Society Insurance focused its complaint around the assertion the underlying lawsuits accuse Templeton Rye of fraud, a defense against which Society says would be excluded from coverage under policies held by brand.

“In sum … defendant Templeton Rye Spirits engaged in deceptive marketing practices with respect to the advertising of its whiskey,” Society asserts in its complaint. “These allegations do not come within the scope of coverage under the insurance policies that Society issued to defendant Templeton Rye Spirits.”

Society is being represented in the action by attorneys Michael D. Sanders, Thomas B. Underwood and Richard J. VanSwol, of Purcell & Wardrope in Chicago.

Society Insurance’s complaint comes weeks after whiskey consumer Christopher McNair first filed suit against Templeton Rye, claiming the bottler had lied to him and other consumers for years over the origin of its whiskey.

Since the brand was launched in 2006, Templeton Rye has marketed itself under the pretense its whiskey follows a “Prohibition-era” recipe using rye produced and distilled in the small town of Templeton, located in west central Iowa, about 85 miles slightly northwest of Des Moines.

Templeton Rye marketed the whiskey as the “favorite drink of Chicago mobster Al Capone,” according to McNair's lawsuit that was filed in September in Cook County Circuit Court and later removed to Chicago's federal court.

However, in reality, McNair contends, the whiskey is distilled and aged at a facility owned by MGP Ingredients Inc., in Indiana and shipped to Templeton, where it is bottled and then distributed for sale in stores, bars and restaurants in the Chicago area and elsewhere.

McNair alleges he and other consumers seeking a “craft” whiskey made in small batches purchased Templeton Rye’s product at a premium price that was unjustified, as Templeton Rye’s owners knew the whiskey was actually little different from that sold under more mainstream labels.

Templeton Rye is also facing litigation from businessman Mario Aliano, one of the owners of Due Fratelli Inc., which owns and operates Aliano’s Ristorante in Batavia in Chicago’s western suburbs.

Aliano also filed a lawsuit alleging he and his company overpaid for the Templeton Rye whiskey, accepting the marketing at face value in response to demand from customers. He has lodged similar suits over other liquor brands, including Angel’s Envy, Tincup American Whiskey and Tito's Handmade Vodka.

McNair and Aliano are seeking court approval to proceed with their suits as class actions.

Society, in its complaint, asserts it doesn't need to defend against either suit in any court because the underlying lawsuits' fraud allegations are not covered by its policies. It also contends the policies it issued to Templeton Rye ran from 2009 to 2011, so the claims fall outside the coverage periods.

“Because the McNair lawsuit and the Aliano lawsuit allege that Templeton Rye whiskey does not conform to the representations made in the advertisements … there is no coverage under the Society policies,” Society contends.