Breach of Contract Claim against Insured Based on Alleged Defective Product Was Not a Covered “Occurrence,” Pennsylvania District Court Decides

September 30, 2015

A Pennsylvania federal district court has ruled that a breach of contract lawsuit against an insured was not a covered “occurrence.”

The Case

Norpaco, Inc. sued Tray-Pak Corporation in a state court in Connecticut, alleging that Tray-Pak had sold it defective polyethylene terephthalate (“PET”) trays for Norpaco’s use. The complaint against Tray-Pak alleged breach of contract, breach of express warranty, breach of implied warranty of merchantability, breach of implied warranty of fitness for a particular purpose, negligence, and negligent misrepresentation.

Tray-Pak sought coverage from Firemen’s Insurance Company of Washington, D.C., which had issued Tray-Pak commercial general liability and umbrella insurance policies.

Firemen’s filed a declaratory judgment complaint in the U.S. District Court for the Eastern District of Pennsylvania, seeking a determination of whether Tray-Pak was entitled to a defense and indemnification under the policies. Firemen’s alleged that neither policy covered Tray-Pak for the Norpaco action because Norpaco’s allegations were for breach of contract and did not allege an “occurrence.”

The insurer moved for summary judgment.

The Court’s Decision

The court agreed with Firemen’s and granted its motion for summary judgment.

In its decision, the court found that the first four counts of Norpaco’s complaint were focused on contract-related causes of action and the last two counts pertained to negligence and negligent misrepresentation, incorporating by reference the allegations of the first four counts. In the court’s opinion, the allegations in the Norpaco complaint against Tray-Pak amounted to a claim that the PET trays did not conform to a contractually specified and required performance standard.

The court ruled that the alleged breach was of a duty imposed by mutual consensus between Tray-Pak and Norpaco. Because the Norpaco complaint sounded in breach of contract, there was no “occurrence,” and the claim was not covered under Firemen’s insurance policies, the court concluded.

The case is Firemen’s Ins. Co. of Washington, D.C. v. Tray-Pak Corp., No. 5:13-cv-3711 (E.D. Pa. Sept. 17, 2015).

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  • Robert Tugander





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