3rd Circuit Affirms Summary Judgment Victory in High-Exposure Coverage Case

September 17, 2019 | Complex Torts & Product Liability | Insurance Coverage

The Third Circuit affirmed an award of summary judgment that product liability claims alleging faulty workmanship do not amount to an “occurrence” under insurance policies that define an “occurrence” as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.”

The decision represents a victory to Great American Assurance Company and other insurers with similar policy language, and denies a product manufacturer insured coverage for a large sum under most of its insurance policies. The Court, however, vacated the decision of the District Court under certain other insurance policies that defined the term “occurrence” differently, reviving the insured’s claims for coverage.

In the original case, Marvin Windows, a manufacturer of windows and doors, claimed Sapa Extrusions’ frames (which were incorporated in Marvin’s products) prematurely failed in coastal installations. According to Marvin, the frames, called profiles, oxidized, cracked and peeled. Marvin sued Sapa, claiming more than $100 million in damages for, among other things, incurring the cost of investigating and responding to consumer complaints and repairing and replacing the failed frames.

Sapa settled Marvin’s suit for “a large sum.” Sapa then filed an action seeking coverage under 28 primary, umbrella and excess CGL policies issued by eight different insurers, including Great American Assurance Company. The District Court awarded all of the insurers summary judgment, holding that “[t]he facts alleged in Marvin’s complaint do not amount to an ‘occurrence’” under the insurance policies. Sapa appealed.

In Sapa Extrusions, Inc. v. Liberty Mutual Insurance Company, 2019 U.S. App. LEXIS 27668 (3d Cir. Sept. 13, 2019), the Third Circuit affirmed in part, and reversed in part and remanded for further proceedings. The Court observed that all of the policies afforded coverage only if property damage was caused by an “occurrence,” but the policies variously defined the term “occurrence.”

The Court grouped the policies into three different “occurrence” definitions:

(1) the “accident definition,” in 19 of the policies, in general, the ACE policies and those that follow form to them, which define “occurrence” as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions”;

(2) the “expected/intended definition,” in seven of the policies, the National Union policies and those that follow form to them, which define “occurrence” as “an accident, including continuous or repeated exposure to conditions, which results in Bodily Injury or Property Damage neither expected nor intended from the standpoint of the Insured”; and

(3) the “injurious exposure definition,” in two of the policies, the Liberty Mutual policies, which define “occurrence” as “injurious exposure, including continuous or repeated exposure, to conditions, which results, during the policy period, in personal injury or property damage . . . neither expected nor intended from the standpoint of the insured.”

The Third Circuit held that, as to those policies containing the “accident definition,” which included the policies issued by Great American, “the factual allegations in the Marvin Complaint do not amount to an ‘occurrence’ that could trigger coverage.”

The Court reasoned that Marvin alleged faulty workmanship, and such “allegations do not amount to an ‘occurrence’ – that is, an unforeseeable, ‘fortuitous event.’” The Third Circuit, quoting the Pennsylvania Supreme Court’s decision in Kvaerner, held “[p]ut simply, it was ‘largely within [Sapa’s] control whether it supplie[d] the agreed-upon product,’ so any liability flowing from Sapa’s failure to deliver a product that met the agreed specifications was ‘too foreseeable to be considered an accident.’”

As a result, the Court affirmed the District Court’s judgment as it relates to policies containing the “accident definition.” As to policies containing the “expected/intended definition” and the “injurious exposure definition” of “occurrence,” the Court vacated the District Court’s judgment, predicting that the Pennsylvania Supreme Court would find these definitions “ambiguous,” and remanded for further proceedings consistent with its opinion.

Great American was represented by Rivkin Radler partner Michael A. Kotula.

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  • Michael A. Kotula





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