Wisconsin Supreme Court holds that a “knowing violation” exclusion does not eliminate the insurer’s duty to defend when coverage could be provided for the alleged injuries without establishing a knowing violation. Abbot Laboratories alleged that Ixthus imported foreign versions of their blood glucose test to sell. West Bend Mutual denied Ixthus’s tender of coverage stating that while the complaint fell within the policy the knowing violation exclusion eliminated a duty to defend.
The court held that Ixthus was entitled to coverage under the personal and advertising injury provision. This order is significant because the Wisconsin Supreme Court looked to the legal requirements of the plaintiff’s cause of action rather than focusing on the overarching allegations triggering coverage. The court noted that the count alleging deceptive business practices does not require Abbot to establish intent to defraud or mislead to prove its case, meaning the knowing violation exclusion would not bar coverage. This ruling demonstrates insurers should be prepared to defend their policyholders if there is a possibility that the plaintiff could prevail on a claim of non-intentional conduct.