District Court Determined That Product Defects Attributed to Manufacturer Were Not “Occurrences” Under Excess Policies

National Union Fire Insurance Co. of Pittsburgh PA.v. Gerling America Ins. Co.et. al.

(United States District Court, Middle District of North Carolina, June 2, 2009)

This declaratory judgment action involved a declaration of the insurance obligation of various insurers in connection with underlying lawsuits alleging defects in impact-resistant window resins that the policyholder produced for various window and door manufacturers.  Specifically, National Union filed this action seeking a determination that it did not owe coverage under its umbrella policies on the basis that the manufacturer’s defective resins do not constitute an “occurrence” within the meaning of the applicable policies. In a lengthy analysis, the court held that the insured’s reliance on ABT Building Products Corp. v. National Union Fire Insurance Co. of Pittsburgh, Pa., 472 F3d 99 (4th Cir 2006) is misplaced and distinguishable as the claims in the subject suit did not allege damages to property separate from the windows in which the resin was placed, nor were the claims based in negligence.  Rather, here there was an intentional deviation from the express contract specifications in product design and manufacture whereas the ABT court specifically recognized ABT’s acts of negligence.  The court further highlighted that here the underlying claims arose out of contract; the damage alleged is damage to the windows on which the defective resin was applied; and there was no external force causing the claimed damage – rather the damage was solely the manufacturer’s failure to meet contractual specifications.  Thus, the court held that the policyholder’s breach of contract did not constitute an “occurrence” within the meaning of the policy. 


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By Daniel W. Gerber and Paul. C. Steck