A bulk supplier of prescription drugs, which was not a manufacturer, supplied drugs in bulk to a retailer. A customer of the retailer suffered severe bodily injury because of misleading and defective labelling by the retailer. The retailer was entitled to the benefit of the distributor’s insurance if any claim was ‘only with respect to bodily injury or property damage arising out of the supplier’s products’. The additional insured endorsement did not apply to repackaging of products or products which had been labelled or relabelled after distribution.
The court held that although the phrase ‘arising from’ is consistently given a broad interpretation, it does require a minimal causal connection or incidental relationship between the claim and the alleged cause. The court held there was no such causal connection to the product itself. The injury arose not from a defective product, but from the retailer’s failure to warn of the risks and possible side-effects of the product. Moreover, the endorsement which excluded repackaging and relabelling applied because the claim was based on mislabelling of a product that was itself not defective.
It is accepted worldwide that the terms ‘arising out of’ or ‘arising from’ do not import any particular standard of causation into an insurance policy. Even if there is minimal causation or an incidental relationship, cover must be provided. If you use these phrases be aware that they are broadly interpreted and insurers (and others) will seldom avoid liability when the phrase is used.
The case is Target Corp v Golden State Insurance Co Limited.