I ran a “6-Week Transformation Challenge” marketing campaign: “Lose 20lbs or your money back!” A client lost only 5lbs. I refunded her money. She sued me anyway for “Fraud” and “False Advertising,” claiming she wasted her time and delayed seeking “real” medical help for her obesity because of my promises.
Key Takeaways
- Guarantees are Uninsurable: Insurance covers accidental errors. It does NOT cover “Failure to perform as promised” or “Breach of Warranty.”
- False Advertising Exclusion: GL policies cover “Advertising Injury,” but exclude “False, deceptive, or misleading advertising.”
- Consumer Protection Laws: You can be fined by the FTC for making unsubstantiated health claims. Insurance does not cover fines.
- The Refund vs. The Lawsuit: A refund resolves the contract. It does not resolve the tort of fraud.
The “Why”: The Warranty Exclusion
The Trap:
Exclusion: “Liability arising from any warranty, guarantee, or promise of performance.”
By saying “You will lose 20lbs,” you created a warranty.
When you failed, you breached it.
Insurance denies this claim 100% of the time.
The Investigation: I Quoted 3 Major Carriers
1. NEXT Insurance
- My Analysis: Explicit exclusion for “Guarantees.” They cover bodily injury, not “disappointment.”
2. Hiscox
- My Analysis: They defend against “Misrepresentation” in some consulting policies, but not if the marketing was blatantly false (e.g., “Guaranteed results”).
3. PHLY
- My Analysis: They focus on physical injury. They would likely send a denial letter for a “failure to lose weight” claim, viewing it as a business dispute, not a liability event.
[IMAGE: Screenshot of a “Safe Marketing” disclaimer: “Results may vary”]
Comparison Table: Guarantee Liability
| Scenario | Insurable? | Why? |
| “Lose 20lbs Guaranteed” | NO | Warranty Exclusion |
| “Our Program Helps…” | Yes | Standard Marketing |
| “Cures Diabetes” | NO | Illegal Medical Claim |
Step-by-Step Action Plan
- Scrub Your Ads: Delete “Guaranteed.” Use “Results vary.”
- Contracts: Add a clause: “Client acknowledges that results depend on their own adherence and physiology.”
- Arbitration: Put a mandatory arbitration clause in for fee disputes.
- Don’t Settle for “Fraud”: If sued, hire a lawyer to get the “Fraud” claim dismissed. Fraud is uninsurable; “Breach of Contract” is cheaper to manage.
FAQ
Can I offer a money-back guarantee?
Yes, as a business policy. Just don’t expect insurance to bail you out if it goes wrong.
Is this “Malpractice”?
No, unless you claimed to be a doctor.
What if I used “Before and After” photos?
Ensure they are real and include “Results not typical” disclaimer.