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March 1, 2016In the News

Eric Barber quoted in "Wis. Justices Deal Policyholders Blow In Defective Part Suits"

Law360

Michael Best Partner Eric G. Barber was quoted in Law360's article on a recent Wisconsin Supreme Court ruling regarding insurance policyholders.

"The Wisconsin Supreme Court's ruling Tuesday that two insurers don't have to cover claims stemming from the destruction of a shipment of health supplements caused by an improper ingredient is a blow to product manufacturers, given the court's use of tort law principles to limit coverage, experts say.

In a 3-2 decision, the Wisconsin high court concluded that Evanston Insurance Co. and The Netherlands Insurance Co. don't have to defend or indemnify their policyholders, a pair of probiotic suppliers, in litigation initiated by pharmacy wholesaler Wisconsin Pharmacal Co.

The policyholders, Nebraska Cultures of California Inc. and Jeneil Biotech Inc., provided the wrong probiotic bacteria for Pharmacal contractor Nutritional Manufacturing Services Inc. to include in women's daily probiotic supplement tablets. Pharmacal had to recall and destroy the shipment of tablets when the defect was discovered, and it sued the probiotic suppliers and their insurers.

Applying the 'integrated system rule' originating in tort law's economic loss doctrine, the majority of the Wisconsin Supreme Court determined that the incorporation of the defective ingredient into the tablets didn't equate to property damage as defined in the Evanston and Netherlands policies because nothing was damaged besides the tablets themselves.

Michael Best & Friedrich LLP partner Eric G. Barber, who represents policyholders, said that the Wisconsin high court's injection of the economic loss doctrine into the interpretation of an insurance policy 'simply had never been done before in this state and certainly not in a way that trumped defined language contained in the insurance policy.'"

To read the full article, click here

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