No more problems for struggling skin-care company Rodan + Fields: insurer sues
Skincare company Rodan + Fields, already facing a series of challenges in the form of two class actions against its Lash Boost eyelash growth serum, is facing a new problem: Its insurer wants to jump ship.
In a 19-page complaint filed in California district court on July 1, Ironshore Specialty Insurance Co., a subsidiary of Liberty Mutual, alleges that Rodan + Fields violated federal and state laws through its marketing and distribution of Lash Boost, which means the insurer shouldn’t have to pay for the legal defense of the skin care business or shell out for the claims of the class action plaintiffs.
The first Lash Boost class action lawsuit, still pending, was filed in 2018 as consumers complained that the serum, which sells for $ 155, caused irritation and swelling, among other unwanted side effects. Rodan + Champs refuse any wrongdoing, claiming that it provides instructions to users, including those who experience irritation. Ironshore also alleges that Rodan + Fields failed to honor its end of the police deal because the company failed to notify Ironshore that another insurer was defending them as well, withheld numerous court cases and failed submitted invoices for its legal defense in a timely manner.
âRodan + Fields is aware of and is reviewing the lawsuit brought by our insurance company, Ironshore, regarding an insurance coverage litigation related to the ongoing Lash Boost case,â the company spokesperson said, Franny Mulberg. Forbes by email.
The Ironshore trial is the latest flaw to appear for Rodan + Fields. The company, co-founded by dermatologists Katie Rodan and Kathy Fields, began life as a department store brand in 2002, and was purchased by EstÃ©e Lauder the following year for an undisclosed amount. Dissatisfied with the brand’s marketing, the co-founders bought their eponymous brand from EstÃ©e Lauder in 2007. They quickly turned to multi-level marketing (also known as direct selling) to sell their products. In multilevel marketing, ordinary people sign up as consultants to sell products. Consultants, sometimes called distributors, earn commissions on product sales and for recruiting more people to sign up as consultants. It is notoriously difficult to earn any significant income as a distributor. In 2019, the median monthly income of 67% of Rodan + Fields consultants was $ 227. But the move turned out to be a success. Revenue flourished from $ 24 million in 2010 to $ 1.2 billion in 2018.
In October 2020, things were heading south. The co-founders lost their billionaire status due to declining revenues and the number of independent sales consultants, the army of ordinary people who sign up to sell Rodan + Fields products. Moody’s downgraded the company’s credit rating on $ 600 million in debt in April 2020 and remains bearish on the company. Despite Rodan + Fields’ “good brand recognition in niche markets,” a Moody’s report from April 2021 said it maintained a negative outlook due to continued declining revenues, with sales falling to 1.077 billion dollars in 2020 compared to $ 1.3 billion the previous year, reduction in the number of independent business advisers.
Lash Boost class actions threatened sales of one of Rodan + Fields’ most popular products. Some consumers have reported that using the eyelash serum causes itchy eyes, sagging eyelids, infections, visual impairment, and even a change in the color of the iris. There were other issues. Consumer goods giant Procter & Gamble filed a Better Business Bureau complaint against Rodan + Fields in 2018 for allegedly misleading claims that a Rodan + Fields vitamin A serum was significantly more effective than one made by Olay, a P&G brand. Rodan + Fields sued Procter & Gamble in response, ultimately dropping the case in August 2018; P&G has put its BBB complaint on hold. Federal Trade Commission reprimanded Rodan + Fields in a 2020 letter for what he says are misleading claims by independent sellers on social media related to the coronavirus pandemic; Rodan + Fields said they ensure consultants follow FTC guidelines and do not tolerate false or misleading claims. Today, the company’s insurer is also busy.
Ironshore’s lawsuit is not unusual, according to two insurance experts joined by Forbes. “This is basically a request from the lawyers for the judge to interpret Ironshore’s policy rather than going through a litigation process,” said David Stegall, a longtime former insurance executive based in Alabama and a expert witness in this kind of legal case. He says Ironshore wants the judge to say what the police mean and make a decision quickly, allowing the insurer to avoid lengthy legal proceedings.
It is not yet known whether Ironshore is Rodan + Fields’ main insurer. Rodan + Fields is due to file a response in court within the next two weeks. Liberty Mutual, Ironshore’s parent company, declined to comment, saying it does not publicly address the legal disputes.
The insurance battle centers on Rodan + Fields’ use of a synthetic ingredient, isopropyl cloprostenate, in Lash Boost. It is known as a prostaglandin analogue by the Food and Drug Administration, which requires products containing this class of compounds to be labeled as a drug. Isopropyl cloprostenate is also believed to be the cause of the swelling, irritation and other unwanted effects experienced by consumers, according to class actions. Ironshore’s complaint states that there are, in total, two class actions in California involving Lash Boost (one at the federal level and one at the state level) and at least three other personal injury lawsuits. If class action courts find Rodan + Fields should have sought FDA approval for Lash Boost as a drug, Ironshore says it is not financially obligated to cover Rodan + Fields legal costs or to pay damages to the plaintiffs.
âYou can’t take out insurance for something illegal,â says insurance expert Stegall, referring to the FDA’s rules on isopropyl cloprostenate. Currently there is only one FDA approved eyelash growth drug in the market: Latisse, which is produced by Allergan. (Its active ingredient, bimatoprost, was first developed to treat glaucoma, and like Lash Boost, is a prostaglandin analogue. Eyelash growth was an unintended side effect, but its discovery led to Latisse.)
Some of the known from Latisse Side effects (redness, itching) are similar to those of Lash Boost. An archived October 2019 version of the Lash Boost product page accessible by To bes includes product warnings, but consumers should click a menu below the buy button to view them. The last product page for Lash Boost, unlike the 2019 version, places the itch and side effect warning more prominently below the button to purchase the product.
Even if the courts rule that Lash Boost does not need to be labeled as a drug, Ironshore does not believe it is obligated to cover Rodan + Fields legal fees or claims for plaintiffs. The insurer’s complaint states that Rodan + Fields failed to communicate with them quickly enough about the class actions, thereby voiding their coverage. It took more than a year for the company to provide documents on an anonymous second insurer who is also defending them in class actions, Ironshore explains. Although the first class action lawsuit was filed in 2018, Ironshore also claims that Rodan + Fields waited until March 2021 to submit invoices for his legal defense. Rodan + Fields actions “put their coverage at risk,” says insurance expert Stegall. “It is a condition of practically any policy [that] they must cooperate with the insurance company.
A settlement hearing for the Rodan + Fields class action lawsuit in California is scheduled for August 3. Its federal class action lawsuit may come to an end: the company is currently negotiating a settlement. Mulberg, spokesman for Rodan + Fields, said that “we are on the verge of reaching a resolution of this matter”.