Section 10.19 Generally

• Library: Insurance Practice 2015

Exclusions j–n are probably the most vexing exclusions to Coverage A. They have given rise to much litigation and probably have resulted in more court decisions than any other exclusions. The results have not always been consistent. Through the years, the wording of the exclusions has changed until they have evolved into their present forms. Each change gives rise to different judicial interpretations that may appear to conflict with prior interpretations.

Basically, exclusions j–n exclude coverage for damage to:

· the insured’s property;

· premises the insured sells, gives away, or abandons;

· property loaned to the insured; and

· personal property in the insured’s care, custody, and control.

Additionally, exclusions j–n exclude damage to the insured’s product and the insured’s work as defined in the policy.

It is not the purpose of liability insurance to guarantee the insured’s product or the insured’s work. There has long been recognized a distinction between liabilities arising from guaranteeing the quality of the work performed or product provided, which are contractual risks, whether express or implied, and those liabilities arising from unpredictable losses, which are beyond the effective control of the insured and which are not likely to occur frequently or as a normal or inherent consequence of the business operation. When a defective product causes injury to a person, the damages sought by that person are covered by insurance. The defective product itself is not.

The CGL policy combines various property damage exclusions into exclusion j. An exclusion often involved in litigation is paragraph (4) of exclusion j: “Personal property in the care, custody or control of the insured.” Copyright, ISO Properties, Inc., 2001. Under earlier CGL policy forms, the care, custody, and control exclusion was not limited to personal property. In the case of personal property, control is more easily determined than in the case of real property.

In Kirchner v. Hartford Accident & Indemnity Co., 440 S.W.2d 751 (Mo. App. W.D. 1969), the court held that a subcontractor did not have care, custody, or control of a building that collapsed over a weekend while the subcontractor was physically absent from the site. On the other hand, the court in Estrin Construction Co. v. Aetna Casualty & Surety Co., 612 S.W.2d 413 (Mo. App. W.D. 1981), held that Estrin, a general contractor, had the contractual duty to supervise the job and to protect the property during construction. Even though the damage occurred after working hours, the insured still had care, custody, and control, and coverage was excluded.

Moore v. M.F.A. Mutual Insurance Co., 422 S.W.2d 357 (Mo. App. W.D. 1967), and Opies Milk Haulers, Inc. v. Twin City Fire Insurance Co., 755 S.W.2d 300 (Mo. App. W.D. 1988), involved personal property. In each case, the court found that the insured had the care, custody, and control of the property, and coverage was excluded. National Union Fire Insurance Co. of Pittsburgh, Pennsylvania v. Structural Systems Technology, Inc., 756 F. Supp. 1232 (E.D. Mo. 1991), was decided under a later CGL policy form. In that case, the court found that a collapsed radio tower was real property and that the care, custody, and control exclusion did not apply. In Valentine-Radford, Inc. v. American Motorists Insurance Co., 990 S.W.2d 47 (Mo. App. W.D. 1999), coverage was excluded because the damaged personal property was in the “care, custody, and control” of the insured.

Property damage exclusion j, paragraph (2), also excludes damages to “[p]remises you sell, give away or abandon.” Copyright, ISO Properties, Inc., 2001. The old form excluded coverage for “property damage to premises alienated by the named insured.” In Taylor-Morley-Simon, Inc. v. Michigan Mutual Insurance Co., 645 F. Supp. 596 (E.D. Mo. 1986), the court found that the exclusion was not ambiguous and excluded coverage for damage to a home that was sold by the insured to the homeowners.

The CGL policy provides coverage for products liability arising out of the manufacture, sale, or distribution of defective products that fall within the definition of “your product.” It also provides coverage for liability arising out of completed operations that fall within the definition of “your work.” Before the development of the law of strict liability in tort and the adoption of the Restatement (Second) of Torts § 402A (1965), it was difficult for a plaintiff to recover for injury caused by a defective product. The injured plaintiff could prove neither negligence nor privity. The manufacturer’s risk of liability was minimal for injuries occurring away from its premises...