While affirming the district court's denial of coverage under policies that defined occurrence as an accident, the Third Circuit remanded for further consideration of the policies containing an expected and intended definition of occurrence. Sapa Extrusions, Inc. v. Liberty Mut. Ins. Co., 2019 U.S. App. LEXIS 27668 (Sept. 13, 2019).
Sapa manufactured aluminum extruded profiles which were used for door and window frames. A pretreatment coating process was used in several aluminum clad windows and doors. Several stages were involved including cleaning and degreasing to remove organic and inorganic materials, chemical etching, and chemical coating to assist with paint adherence. For decades, Sapa supplied profiles to Marvin Lumber and Cedar Company. Marvin incorporated these extrusions with other materials to manufacture aluminum doors and windows. If an extrusion was defective, the whole window or door would have to be replaced. Between 2000 and 2010, Sapa sold 28 million windows and doors.
Marvin sometimes received complaints from customers that the aluminum parts of windows or doors would corrode. At first, Sapa tried to determine the nature of the problems and fix them. In 2010, Marvin sued Sapa, alleging Sapa made specific warranties to Marvin about its extrusions. Marvin sought monetary damages for economic losses stemming from investigating and responding to consumer complaints, identifying and qualifying alternative extrusion suppliers, replacing the failed extrusions, and experiencing lost sales and profits. On the eve of trial, the parties settled for a large sum.
Sapa held 28 CGL policies through eight carriers, covering the relevant period during which Sapa did business with Marvin. Only one carrier, Zurich, accepted the defense under a reservation of rights. Sapa sued the remaining carriers, asserting breach of contract under the 28 policies and seeking a declaratory judgment to recover the cost of the underlying settlement.
The district court found there was no occurrence under any of the policies and there was no duty to indemnify.
The Third Circuit analyzed the policies under Pennsylvania law. Nineteen of the policies defined an "occurrence" as an accident. Under these policies, faulty workmanship did not constitute an accident as required to set forth an occurrence under the CGL policies. A degree of fortuity was not present in a claim for faulty workmanship.
Seven policies defined "occurrence" as "an accident, including continuous or repeated exposure to conditions, which results in . . . property damage neither expected nor intended from the standpoint of the Insured." The district court considered these policies together with the "accident" policies. The Third Circuit held the district court should have considered these poliies separately. The expected and intended definition of "occurrence" in these policies was ambiguous. Under the expected and intended definition, an "occurrence' included those conditions not of the same general type which the insured intended to cause.
Two policies contained the injurious exposure definition of "occurrence." The definition in these policies was identical to the expected and intended definition, except that it used the term "injurious exposure" instead of "accident. The district court did not analyze these policies separately, despite their unique wording. Therefore, the district court's decision was vacated as it related to these two policies and remanded for further individualized consideration.
