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Are Your Pharma Shipments Properly Valued?

Posted in Drug Security, Supply Chain

A recent case highlights the need to properly value shipments of pharmaceuticals – and what can go wrong if you do not.

In Menora Mivtachim Insurance v. New Century Transportation, an insurance dispute arose concerning a refrigerated pharmaceuticals shipment from Pennsylvania.  Essentially, a temperature sensor had malfunctioned and the product was arguably damaged in transit – although no tests of the pharmaceuticals were made to confirm that they were damaged.  The manufacturer’s insurance company apparently paid out on a claim after the product was deemed to be unsalable, and then sued the transportation company.  The court was specifically asked to rule on a motion for summary judgment filed by that transporter.

The court found that proof of a sensor malfunction created a fact issue regarding damage of the pharmaceuticals.  The court also found that a jury could find, even absent any testing, that the manufacturer could no longer assure its customer that the product was unadulterated and, therefore, was fit for its intended use.  For this reason, the court denied the transporter’s motion; a jury (and not this judge) would need to decide the issue.

Finally, the court also had occasion to discuss the manufacturer’s valuation of the goods in light of the transporter’s claim that the parties had agreed to a lower liability limit.  The argument was rejected based on the course of dealing between the parties.

This opinion highlights the need for manufacturers to (1) be specific when valuing goods in transit or take the risk of insufficient reimbursement after a loss, and (2) the care that must be taken with refrigerated shipments and adequately insuring them.