Warehouse Labeling Mistake Ruled a Covered “Occurrence” Under Commercial General Liability Policy, Triggers Duty to Defend by: Michael J. Patterson
The Illinois Appellate Court, First District, recently held that a commercial general liability insurer had a duty to defend its insured because an underlying negligence action alleged conduct that constituted an “accident” and, thus, an “occurrence” under the policy. United Nat’l Ins. Co. v. Faure Bros., No. 1-10-2214 (Ill. App. Ct. May 17, 2011).
In United Nat’l, plaintiff, United National Insurance Company (“United National”), issued a commercial general liability insurance policy to defendant, Faure Brothers Corporation (“Faure Brothers”). Air Products and Chemicals, Inc. (“Air Products”), filed suit against one of Faure Brothers’ divisions, Gateway Warehouse Company, Inc. (“Gateway”), which warehouses, re-labels and ships chemical products for its customers. In its lawsuit, Air Products alleged Gateway negligently mislabeled its products, in turn causing Air Products to ship improper chemical products to some of its customers and suffer damages. Faure Brothers demanded that United National defend the negligence lawsuit, but United National refused. Both Gateway and United National filed declaratory judgment actions and motions for summary judgment. The circuit court held that United National had no duty to defend the lawsuit, finding that Air Products’ complaint did not allege an “occurrence” as defined by the policy.
On appeal, the appellate court noted that the applicable policy provisions covered “property damage” caused by an “occurrence”, and that “occurrence” was defined as an “accident”. As the policy did not define “accident”, the court relied on the Illinois Supreme Court’s definition of “accident” in insurance cases. It stated that “determination of whether an occurrence is an accident is focused on ‘whether the injury is expected or intended by the insured, not whether the acts were performed intentionally.’” Id. (internal citation omitted). Here, the court reasoned that Faure Brothers unexpectedly mislabeled the chemicals, and thus the result was an “accident”.
Accordingly, in construing the underlying complaint liberally in favor of the insured, the appellate court held that Air Products’ allegations fell within, or potentially within, the policy’s coverage. Therefore, the court reversed the circuit court’s judgment order and found that United National had a duty to defend Faure Brothers in the underlying action.
This Blog is made available by Laurie & Brennan, LLP for general educational purposes only. The purpose of the Blog is not to provide specific legal advice on any particular matter. By using this Blog site you understand that there is no attorney client relationship between you and this firm and the authors or members of the firm. This Blog should not be used as a substitute for competent legal advice from a licensed professional attorney in your state. Under rules applicable to the professional conduct of attorneys in various jurisdictions, the material on this Blog may be considered advertising material.
