X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.

The full case caption appears at the end of this opinion.

Posner, Circuit Judge. This diversitysuit, governed all agree by Californialaw, involves a dispute between twoinsurance companies over the scope andapplicability of the form of insuranceknown as a “vendor’s endorsement.” Amanufacturer will often add to itsproducts liability insurance anendorsement extending coverage todistributors of its product who may besued for breach of warranty or for strictproducts liability should the productturn out to be defective or unreasonablydangerous and cause an injury. “When amanufacturer produces a product whichcontains a defect in design or one causedby faulty workmanship and it is sold to adistributor who in turn sells it to aretailer, the latter two links in thechain to the ultimate consumer ordinarilyare merely conduits in the stream ofcommerce which ends at the ultimateconsumer. The manufacturing or designdefect, as to which they had no creativerole, was in existence when each of themreceived the product and each is merely anonculpable accessory in the eventualsale. Nevertheless, each, in that role,is strictly liable to the injuredultimate user. . . . The nonculpabledistributor or retailer is not, however,without remedy and has ‘an action overagainst the manufacturer who should bearthe primary responsibility for puttingthe defective products in the stream oftrade.’ . . . Since, in the ordinarycase, the liability trail eventuallyleads back to the manufacturer, andconsequently to his insurer, it is amatter of common sense and fair dealingthat the coverage of the manufacturershould be extended to the distributor andthe insurance of the distributor in turncover the retailer.” American White CrossLaboratories, Inc. v. Continental Ins.Co., 495 A.2d 152, 155-56 (N.J. App.1985) (citations omitted); see alsoHartford Accident & Indemnity Co. v.Bennett, 651 So. 2d 806, 808 (Fla. App.1995); Dominick’s Finer Foods, Inc. v.American Manufacturers Mutual Ins. Co.,516 N.E.2d 544, 546 (Ill. App. 1987);Peter J. Kalis, Thomas M. Reiter, & JamesR. Segerdahl, Policyholder’s Guide to theLaw of Insurance Coverage sec.19.06[B][4][a], pp. 19-37 to 19-38(1997). We don’t think “fair dealing” hasmuch to do with anything, but one canperceive the economic logic of this formof insurance easily enough; it allows theinsurer to coordinate the defense ofmultiple suits arising out of the sameinjury and spares the distributor theexpense of hiring a lawyer to defendagainst a suit arising out of a design ormanufacturing defect with which thedistributor had nothing to do.

 
Reprints & Licensing
Mentioned in a Law.com story?

License our industry-leading legal content to extend your thought leadership and build your brand.

More From ALM

With this subscription you will receive unlimited access to high quality, online, on-demand premium content from well-respected faculty in the legal industry. This is perfect for attorneys licensed in multiple jurisdictions or for attorneys that have fulfilled their CLE requirement but need to access resourceful information for their practice areas.
View Now
Our Team Account subscription service is for legal teams of four or more attorneys. Each attorney is granted unlimited access to high quality, on-demand premium content from well-respected faculty in the legal industry along with administrative access to easily manage CLE for the entire team.
View Now
Gain access to some of the most knowledgeable and experienced attorneys with our 2 bundle options! Our Compliance bundles are curated by CLE Counselors and include current legal topics and challenges within the industry. Our second option allows you to build your bundle and strategically select the content that pertains to your needs. Both options are priced the same.
View Now
October 15, 2024
Los Angeles, CA

Join the industry's top owners, investors, developers, brokers & financiers at THE MULTIFAMILY EVENT OF THE YEAR!


Learn More
October 15, 2024
Los Angeles, CA

Law.com celebrates the California law firms and legal departments driving the state's dynamic legal landscape.


Learn More
October 15, 2024
Dallas, TX

The Texas Lawyer honors attorneys and judges who have made a remarkable difference in the legal profession in Texas.


Learn More

McDermott Law, LLC, a boutique Plaintiffs-focused firm located in the Denver Tech Center, has an opening for a full-time associate attorney....


Apply Now ›

Beitchman & Zekian, P.C. seeks a motivated and ambitious attorney with 2 to 4 years of civil and business litigation experience for its ...


Apply Now ›

Job Summary: The Director of Operations will be responsible for the strategic and operational management of the firm's Personal Injury pract...


Apply Now ›