In West Bend Mutual Insurance Co. v. Ixthus Medical Supply, Inc. (2019 WI 19), a 6-0 Wisconsin Supreme Court held that the insurer had a duty to defend in an advertising injury case.
Health care manufacturing company Abbott filed a suit against Ixthus, claiming that Ixthus wrongfully diverted test strips intended for international markets to domestic markets. Ixthus subsequently tendered its defense to its insurer West Bend. West Bend denied Ixthus’s defense, arguing there was no duty to defend because the policy also contained exclusions for knowing violations and criminal acts. West Bend also argued there was no connection between Ixthus’s covered advertising activity and the injury to Abbott. Instead, West Bend claimed Abbott’s complaint alleged only wrongful importation and distribution against Ixthus.
In an opinion authored by Justice Rebecca Bradley, the court ruled against West Bend. First, the decision stated that Abbott’s complaint did allege a causal connection between Abbott’s injury and Ixthus’s covered advertising activity. Since the complaint includes Ixthus in the defendants who allegedly advertised, West Bend has a duty to defend, even if later proceedings might prove Ixthus was not one of the defendants who actually advertised.
Next, the court analyzed whether the knowing violation and criminal acts exclusions of the policy applied. The court found that neither exclusion applied because the complaint contained at least one allegation that would not require intent and at least one allegation that would not require a criminal charge for the plaintiff Abbott to prevail. Since there is at least one claim in the complaint that is potentially eligible for coverage under the policy, West Bend has a duty to defend.