36 JUNE 2016 Claims Magazine PropertyCasualty360.com
In other words, the “your product”
The “your work” and “your product”
exclusions are comparable, and both are
often cited by insurers in products liability
and faulty workmanship claims. For ex-
ample, in Thruway Produce, Inc. v. Mass.
Bay Ins. Co., 114 F. Supp. 3d 81 (W.D.N. Y.
2015), the insurer relied on both exclu-
sions to deny coverage under the policy
when the insured supplied poisonous
apples that were ultimately incorporated
into baby food. The court, however, held
that the exclusions did not apply, because
the poisoned apples damaged “other prop-
erty” — the baby food. Similarly, in Har-
leysville Worcester Ins. Co. v. Paramount
Concrete, Inc., 10 F. Supp. 3d 252, 266 (D.
Conn. 2014), the court held that the in-
sured’s product (shotcrete), which caused
a pool to crack and leak, constituted dam-
age caused by the insured’s product, not to
the insured’s product, and as a result, the
“your product” exclusion did not apply.
Case law in recent years has confirmed
that the “your work” and “your product”
exclusions do not preclude coverage for
third party property damage. (See Wood
v. Preferred Contrs. Ins. Co. Risk Retention
Grp. LLC, CV 14-128-M-DLC, 2015 U.S.
Dist. LEXIS 151140, 10 (D. Mont. Nov. 6,
2015)). For example, damage to carpeting
caused by a contractor’s defective installation of windows is covered under most
CGL policies. Similarly, faulty materials
and workmanship causing a home to be
continuously exposed to moisture, producing damage to surrounding structural
elements, is covered. (See, e.g., Pulte Homes
of N.M., Inc. v. Ind. Lumbermens Ins. Co.,
367 P.3d 869 (N.M. Ct. App. 2015)).
In Magnus, Inc. v. Diamond State Ins.
Co., 101 F. Supp. 3d 1046, 1049-50 (D.
Kan. 2015), a manufacturer supplied
defective aluminum adapters to another
company, which utilized the adapters in
arrows that were being sold to customers.
The purchaser subsequently informed the
manufacturer that it was experiencing
problems with the adapters “seizing,” or
becoming permanently affixed to the ar-
rows. As a result, the purchasers’ custom-
ers could not remove the broadheads or
perform “screw-off functions” on blades
or arrow tips. Consequently, the arrows
became worthless or had very little value
and the purchasers’ customers were not
satisfied with the product.
Eventually, the purchaser sued the
manufacturer for lost profits and earn-
ings, and the manufacturer’s insurance
company disclaimed coverage, citing
among other provisions the “your prod-
uct” exclusion in the policy. However, the
court rejected the insurer’s position and
held that because the purchaser was not
seeking damages for property damage to
the manufacturer’s product, but rather for
damages (lost profits) caused by damage
to third parties’ property (i.e., its custom-
ers’ arrows), the “your product” exclusion
did not apply.
In a majority of jurisdictions, standard-form CGL policies cover claims of faulty
workmanship and product defects for
damage caused to other work or other
products. Although insurers often cite
various policy exclusions, these exclusions
do not necessarily apply, and policyholders should carefully review all of the underlying facts and have a complete understanding of their policy’s provisions and
exclusions, as well as the applicable law in
their respective jurisdictions, in order to
determine whether an underlying claim is
covered or at least potentially covered.
Matthew D. Stockwell, counsel with Pillsbury
Winthrop Shaw Pittman LLP in New York, focuses his practice on representing policyholders in insurance coverage and construction
litigation. In August 2015, Stockwell was part
of a team that tried a product liability coverage
dispute to a $55 million verdict, including
$46 million in punitive damages in Alameda
County, Calif. Amanda Senske is an associate
with Pillsbury Winthrop Shaw Pittman LLP in
New York, and has experience litigating insurance coverage disputes, including property
insurance and business interruption claims.
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