“Prior Publication Exception Clause” Bars Coverage for Product Disparagement Suit, Third Circuit Rules

A competitor of C.R. Bard, Inc., which manufactures urological medical products, alleged that Bard unlawfully had disparaged a catheter it manufactured by intentionally misrepresenting to prospective purchasers that nitrofurazone, an anti-microbial agent released into the catheter/urethra interface to protect the urethral tract and bladder tissues from infection, was an “antibiotic when it is in fact a bactericidal.“

Bard sought insurance coverage related to the product disparagement lawsuit under insurance policies that had gone into effect on April 1, 2003. The policies provided coverage for “Advertising Injury,” which included coverage for Bard’s alleged disparagement of a competitor’s products.

The policies, however, also included prior publication exception clauses (“PPECs”), which excluded coverage for advertising injuries arising out of oral or written material whose first publication took place before the beginning of the relevant policy period.

The district court granted the insurers’ motions for summary judgment, concluding that the respective PPECs precluded coverage because the alleged advertising injuries arose out of materials first published by Bard before April 1, 2003. Bard appealed to the U.S. Court of Appeals for the Third Circuit.

The circuit court affirmed. It observed that the PPECs were unambiguous, were written in plain language, and were clearly presented to Bard as an exception to the policies. The circuit court then rejected Bard’s argument that the PPECs were inapplicable under the circumstances because the allegedly disparaging statements it made about the competitor’s products during the policy periods were not identical to the statements it had made prior to April 1, 2003.  The Third Circuit explained that the content of Bard’s allegedly disparaging statements made during the policy periods were substantively similar to the content of statements it made prior to April 1, 2003. Accordingly, the circuit court concluded, the district court had not erred in concluding that the PPECs in the insurance policies excluded Bard’s claims for indemnification.

The case is C.R. Bard, Inc. v. Liberty Mut. Ins. Co., Nos. 11-1995, 11-1996 (3rd Cir. Apr. 2, 2012).

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