April 18, 2016

Jenner & Block Partner and co-chair of the firm’s Reinsurance Practice, David M. Kroeger, is quoted in an article published in Law360 that examines implications of the Wisconsin Supreme Court’s recent ruling in an insurance dispute.  Titled “Wis. Justices Deal Policyholders Blow in Defective Part Suits,” the article explains that the court concluded that two insurers do not have to defend or indemnify their policyholders, a pair of probiotic suppliers, in litigation initiated by pharmacy wholesaler Wisconsin Pharmacal Co.  At issue were claims stemming from the destruction of a shipment of health supplements caused by an improper ingredient.  In a 3-2 decision, the court determined that the incorporation of the defective ingredient into the tablets did not equate to property damage as defined in the policies because nothing was damaged besides the tablets themselves.

Mr. Kroeger observes that the court’s majority did not explicitly say, in its 37-page decision, that there is no coverage in any instance where a defective component is mixed into an integrated product.  "Under the logic of the majority decision, it appears there are still instances where coverage would exist," he says.  "If there is something that is clearly a component product that is segregable from the whole, then that may be a way to distinguish this case."