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PA Superior Court Confirms CGL Coverage

By John M. McNulty and Donald R. McMinn

On Dec. 3, 2013, Pennsylvania's intermediate appellate court confirmed the availability of commercial general liability (“CGL”) coverage for manufacturers facing product liability claims that allege damages to persons and property other than the manufacturers' products, even where the underlying actions giving rise to the coverage dispute may involve claims that plead a contract theory, not just those seeking recovery in tort. Indalex, Inc. v. Nat. Union Fire Ins. Co. of Pittsburgh, Pa., — A.3d —, No. 612 WDA 2012, 2013 WL 6237312 (Pa. Super. Ct. Dec. 3, 2013).

The Indalex decision clarifies the limits stated by Pennsylvania's highest court in Kvaerner Metals v. Commercial Union, the 2006 Pennsylvania Supreme Court decision denying coverage for contractual faulty workmanship claims on grounds that damage to a manufacturer's own product does not qualify as an “occurrence” under a CGL policy. In holding that contract and tort claims for damages to products other than an insured's own product qualified as “occurrences,” the Pennsylvania Superior Court in Indalex took a step toward recognizing that coverage assessments for these claims should turn on the applicability, vel non, of the standardized CGL policy's three business risk exclusions, not on whether the theory of recovery for underlying property damage claims is stated in contract (in which case no “occurrence” and no coverage) or tort (in which case an “occurrence” and possible coverage).

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