In a recent case, the First District Court of Appeals provided an interesting opinion and analysis relating to a complex pharmaceutical product recall by the Italian Government. In this case, one of Abbott Laboratories subsidiaries purchased a foreign pharmaceutical company and was accused of making false misrepresentations in the purchase relating to the Potential Risks involved relating to pharmaceutical drug that was subsequently subjected to a product recall.
The Insurer’s Claim for false and misleading representations relating to the risks involved in pharmaceutical drug was denied after a bench trial at the trial level. In this case, the pharmaceutical company had purchased a product recall policy and filed a claim for benefits under the policy based on the recall by the Italian Government. The Insurer attempted to deny the claim by asserting fraud and material misrepresentation of the product recall risks and requested rescission of the insurance contract or policy.
However, in this case, the Underwriters were apprised of the possible risk of a product recall and provided approval of the insurance policy over and in light of the risks of a recall. Thus, the Appellate Court found that the Underwriters had ratified and approved the Company’s application and endorsement. Company was allowed to recover over $85 million in damages under the policy, but was not able to recover the vexatious delay or bad faith insurance claims. Although the Appellate Court was willing to award the Company damages, it was not willing to allow the Company to assert that there was no good faith basis for a coverage dispute.
Since the trial court’s findings were supported by the evidence the Appellate Court refused to overturn its decision based on the bench trial. The Appeal may have turned out differently if, the claim did not involve a claim of intentional misrepresentation, but a negligent misrepresentation claim. In this instance, the Appellate Court limited the coverage to the policy limit of $85 million damages, including costs and prejudgment interest.
For more go to: Underwriters Laboratories and Abbott_072414