Affirming the district court, the Eighth Circuit found that deteriorated bags which unintentionally mixed with landscaping materials did not amount to property damage under the CGL policy. Decker Plastics Corp. v. West Bend Mut. Ins. Co., 2018 U.S. App. LEXIS 2085 (8th Cir. Jan. 29, 2018). The district court's decision was the subject of a prior post [here].
Decker Plastics Corp. sold plastic bags to Al's, Inc. which Al's filled with landscaping materials such as sand and rock. Al's stored the bags outside and sold them to customers. Decker failed to manufacture the bags with an ultraviolet inhibitor, the bags deteriorated in the sunlight, spilling rock and sand off pallets and caused shreds of plastic to commingle with landscaping materials.
Al's sued Decker, alleging, among other things, defective product. Decker's insurer, West Bend, refused to defend or indemnify Decker under its CGL and umbrella/excess liability policies. Decker paid $125,000 to settle Al's claims and then sued West Bend.
The district court granted West Bend summary judgment, concluding there was no "occurrence" triggering property damage coverage. Decker appealed, and the Eighth Circuit reversed, concluding that deterioration of the bags was the covered occurrence and provided coverage for property damage if any damage was done to Al's property other than the bags.
On remand, the district court again granted summary judgment for West Bend, concluding there was no property damage. The Eighth Circuit now affirmed.
The critical question was whether there was some "physical injury" to Al's "tangible property." The Eighth Circuit agreed with the district court that Al's tangible property, its landscaping materials, did not suffer physical injury. Simply filling Decker's defective bags with Al's landscaping materials did not cause covered property damage. The rock and sand were not physically altered or destroyed, but contamination made the landscaping product unsaleable, and the contaminating plastic could not be economically removed. Absent physical alteration, Al's property suffered only diminution in value. Accordingly Decker's claims were properly dismissed because there was no property damage triggering coverage under West Bend's policies.