Alleged Defective or Faulty Workmanship does not Allege Property Damage under Commercial General Liability Policy
In Amerisure v. Microplastics, the insurer, Amerisure, insured the policyholder, Microplastics, a manufacturer of insert molding components, under a series of commercial general liability (“CGL”) policies. The CGL policies required the insurer to pay the policyholder if it should ever be legally obligated to pay damages to any third party, as a result of “property damage” or “personal injury” caused by an “occurrence,” and to defend the policyholder against any lawsuit seeking such covered damages.
Valeo, an unhappy buyer of the policyholder’s products, sued the policyholder for selling Valeo defective products. There was no dispute between Valeo and the policyholder that such products were defective. The insurer denied coverage and defense of the claim because it asserted there were no allegations that property damage was caused by an occurrence.
The presented issue entailed whether the insurer had a duty to defend the insured when the unhappy buyer made only general allegations for costs incurred, as a result of the defective products, without explicitly disavowing any claim for damage to property other than the defective products themselves.
The court held that Valeo alleged a pure breach of contract claim for costs of repair, replacement, or similar economic losses not covered by the insurance policy. The court held there was no indication that the policyholder’s products caused damage to any property, other than the defective products themselves. The court held that an allegation of defective or faulty workmanship in the policyholder’s own products did not, by itself, allege property damage under the CGL policy and could not potentially fall within the scope of the covered “property damage.” Thus, the insurer had no duty to defend under the CGL policies.
Amerisure Mut. Ins. Co. v. Microplastics, Inc., 622 F.3d 806 (Ill., 2010).
