Greenwashing involves making misleading or unsubstantiated environmental, social and governance claims. Recent class actions allege that consumers were misled by claims of “clean beauty” products. For instance, a claim against Target alleges that some “clean” products contain potentially toxic chemicals. Greenwashing claims made against beauty companies, even unfounded ones, may be covered by directors' and officers' (D&O) liability policies. 

Environmental, social and governance claims, including greenwashing claims, are on the rise. Given the lack of regulation for what constitutes a “clean” beauty product, these claims are likely to increase against beauty companies specifically. 

Directors’ and officers’ liability insurance protects a company’s directors and officers from losses resulting from claims made against them in their capacity as directors and officers, including payment of legal expenses, damages, settlements and judgments. D&O insurance covers claims-written demands for monetary or non-monetary relief that allege wrongful acts – errors, misstatements, misleading statements acts or omissions, neglect or breach of duty committed, attempted, or allegedly committed or attempted – by a company’s directors or officers. So, when greenwashing claims against beauty companies involve allegations that its directors or officers made misstatements or misleading statements, these cases may be covered at least for defense costs.   

Carriers may claim exclusions barring coverage for personal and advertising injury claims preclude coverage. These provisions exclude losses “alleging, arising out of, based upon or attributable to” false or misleading advertising, misrepresentations in advertising, or labeling in advertising. However, frequently these exclusions contain carve-outs for claims against the directors and officers for non-indemnifiable claims (“side A” coverage) and, accordingly, the personal and advertising injury exclusion may not apply to claims made against the directors and officers.

It is important to seek legal counsel after a potential claim has been made so coverage counsel can review the pertinent policy language, including any exclusions.