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Insurer must defend under advertising injury provision

West Bend Insurance

An insurer has a duty to defend a medical supply company under its commercial general liability policy’s advertising injury provision in connection with its unauthorized U.S. distribution of another company’s product, says the Wisconsin Supreme Court, in a unanimous ruling.

The issue in Thursday’s ruling in West Bend Mutual Insurance Co. v. Ixthus Medical Supply Inc. involved Chicago-based Abbott Laboratories’ FreeStyle blood glucose test strips, which it sold at a lower price in the international market than in the United States.

In November 2015, Abbott filed suit against Union Grove, Wisconsin-based Ixthus and more than 100 other defendants in federal court in New York in connection with their importing, advertising and distribution of the international test strips in the United States, charging the violation of various federal statutes.

Ixthus’ insurer, West Bend, Wisconsin-based West Bend Mutual denied it had a duty to defend the case. A state circuit court ruled in West Bend’s favor, which was overturned by a state appeals court.

The Wisconsin Supreme Court upheld the appeals court’s ruling. “West Bend asserts the complaint lacks any allegations suggesting a causal connection between Abbott’s injury and Ixthus’s actions,” said the ruling. “We reject West Bend’s contentions and hold the complaint sufficiently alleges the required causal connection.”

“Defendant’s unauthorized importation, advertisement and subsequent distribution causes, or is likely to cause, consumer confusion, mistake, and deception to the detriment of Abbott.

“When such patients encounter the diverted international FreeStyle test strips, which bear certain of Abbott’s trademarks, but which are materially different from what U.S. patients expect, they are likely to be confused and, indeed, disappointed… And the advertisement and sales of diverted international FreeStyle test strips cause great damage to Abbott and the goodwill of Abbott’s valuable trademarks,” said the ruling, which also held that policy exclusions do not apply.

Attorneys in the case could not immediately be reached for comment.

Last year, a federal appeals court upheld dismissal of litigation filed by a frozen fish company against its insurer for its refusal to defend or indemnify it in an advertising injury case.






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