Court gets in line with majority of jurisdictions on faulty products coverage

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By Joseph D Jean and Matthew D Stockwell

A recent decision from an appellate court in Pennsylvania is good news for policyholders who manufacture products, as yet another jurisdiction joins the majority view that product manufacturers may be covered for damage that can be linked to their products under commercial general liability (CGL) policies. 

In Indalex Inc v National Union Fire Insurance Co, several lawsuits were filed against Indalex, alleging that windows and doors it supplied to a residential construction project were defectively designed or manufactured, resulting in water leakage that caused physical damage to the underlying plaintiffs’ residences, as well as personal injuries in some instances. Many contractors also impleaded Indalex into lawsuits brought by homeowners directly against them. The primary insurer, One Beacon, defended and indemnified Indalex in these lawsuits. But when its policy limits were exhausted, National Union, the umbrella insurer, refused to defend and indemnify Indalex. Relying upon Kvaerner and its progeny, it claimed that faulty workmanship and product defects do not qualify as an ‘occurrence’ under the National Union policy.

Indalex brought a coverage action against National Union. The trial court agreed with National Union’s position and granted its motion for summary judgment. On appeal, the court’s focus was whether Indalex’s workmanship could constitute an ‘occurrence’…

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