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Failure of Freezer to Properly Cool Baked Goods Was an “Occurrence” (I.e., “Accident”) within the Meaning of the Commercial General Liability Policy

Plaintiff manufactured a freezer used by a nonparty bakery.  According to the bakery, the freezer didn’t cool cakes to the proper temperature and the cakes were therefore ruined when cut, causing the bakery millions in damages.  The bakery sued plaintiff and plaintiff sought defense and indemnity from its insurer.  The insurer disclaimed coverage, arguing that the facts did not constitute a covered “occurrence” (i.e. “accident”) within the meaning of the policy.  In affirming the denial of the insurer’s motion to dismiss (there was a dissent), the First Department wrote:

Courts have held that commercial general liability (CGL) policies do not insure against faulty workmanship in the work product itself … . However, such policies do insure against property damage caused by faulty workmanship to something other than the work product … . Plaintiff does not seek coverage simply for allegedly faulty workmanship that caused the defect in the freezer. Rather, it seeks defense and indemnity for property damage that [the bakery], a third party, alleged that it suffered because of a defect in the freezer. Indeed, in George A. Fuller Co. (200 AD2d 255), on which defendant places much reliance, the damage occurred to the property upon which the contractor performed the work – that is, to the work product itself. Plaintiff, by contrast, seeks coverage for the damage to the cakes, not to the freezer. This damage is precisely the kind that plaintiff’s CGL policy contemplated, and therefore, the complaint properly alleges an “occurrence” within the meaning of the policy … . [the bakery’s]  loss of use of the facility specifically built to house the freezer is also covered under the policy, since “property damage” is defined to include “[l]oss of use of tangible property that is not physically injured.”  I.J. White Corp v Columbia Cas Co, 2013 NY Slip Op 02500, 651505/11, 8420, 1st Dept 4-16-13

 

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