A federal appeals court has upheld a lower court ruling that a specific company is not entitled to coverage from its insurer in disputes with another company over the quality of its product, based on a policy exclusion.
Toccoa, Georgia-based Morgan Concrete Co. was hired by Dawsonville, Georgia-based Georgia Concrete Co. to supply precast concrete for a multi-storey building being built at Clemson University in South Carolina, according to Friday's decision of the 11th U.S. Circuit Court of Appeals in Georgia Morgan Concrete Co. v. Westfield Insurance Co.
The specifications required concrete that could withstand 5,000 pounds per square inch. During the construction of the second floor, Georgia Concrete encountered strength deficiencies with Morgan Concrete & # 39 ;s concrete.
It ordered higher strength, ready-mixed concrete from Morgan Concrete for future slabs on the second level slab, but experienced the same lack of strength. Georgia Concrete refused to pay Morgan Concrete, which in turn refused to supply more concrete.
Morgan blamed Georgia Concrete for improper handling of its product and stated that Georgia Concrete had exposed the concrete to high ambient temperatures and did not follow the standards for sampling, maintenance and testing of the concrete, which reduced the strength.
The project owner, CEO, and Georgia Concrete decided to repair the slab on the second level. The main contractor also informed the two concrete companies that they were responsible for two incidents of concrete failure.
Morgan Concrete filed a claim with its insurance company, Westfield Center, Ohio-based Westfield Insurance, which provided a defense under a reservation of rights.
Georgia Concrete then proposed splitting repair costs with Morgan Concrete, which refused, and then sued Georgia Concrete in the State Court.
Westfield informed Morgan Concrete that it was withdrawing its defense and that there was no coverage under its policy. Morgan sued Westfield in the U.S. District Court in Atlanta, claiming that Westfield was obligated to defend and replace it.
The court ruled in favor of the insurer and was determined by a unanimous panel court with three judges. "Westfield had no obligation to continue to defend because there was no claim for 'property damage' covered by the insurance policy," the Court of Appeal ruled. The insurance cover was exempted from covering "property damage" on a "product" which was "manufactured, sold, handled or distributed" by Morgan Concrete.
"That exception concerned claims by Morgan Concrete that Georgia Concrete was damaging its product. The policy covered "property damage" caused by Morgan Concrete, but the allegation against it was for breach of contract to recover costs attributable to repairing its defective product. all property that (was) non-defective "in the slab or structure", was mentioned in the decision with reference to a previous case.
"Since the dispute between the concrete companies only involved damage to the inferior concrete and financial losses for repairs required by the defective product, the insurance policy did not require Westfield to provide a defense," the decision states and further confirms the court's decision.
Westfield lawyer Thomas Brennan, Fain Major & Brennan PC in Atlanta, said in a statement, "The 1
Morgan's attorney did not comment.
In February, a state court in Ohio refused to dismiss COVID-19-related disputes against Westfield by a leasing company that lost rental income, stating that the insurer's policy language was ambiguous.