Insurance Law

Florida Court Addresses Products-Completed Operations Hazard

In its recent decision in Atlantic Cas. Ins. Co. v. LTA Distributor, LLC, 2015 U.S. Dist. LEXIS 70462 (S.D. Fla. June 1, 2015), [enhanced version available to subscribers], the United States District Court for the Southern District of Florida had occasion to consider the application of a products-completed operations hazard exclusion in a general liability policy.

The insured, New Life, owned and operated a tire company. It was sued in connection with a defective tire it sold and installed in a customer’s car in June 2010. Three months after installation, that customer was involved in a car accident when the defective tire failed. The estates of two individuals who died in the accident brought suit against New Life, and New Life subsequently sought coverage under its general liability policy issued by Atlantic.

The Atlantic policy contained an endorsement setting forth an exclusion for any bodily injury or property damage included within the products-completed operations hazard, a term defined as follows:

  1. Includes all “bodily injury” and “property damage” occurring away from premises you own or rent and arising out of “your product” or “your work” except:

          (1) Products that are still in your physical possession; or

          (2) Work that has not yet been completed or abandoned. However, “your work” will be deemed completed at the earliest of the following times:

(a) When all of the work called for in your contract has

been completed.

* * *

Work that may need service, maintenance, correction, repair or replacement, but which is otherwise complete, will be treated as completed.

Atlantic disclaimed coverage on the basis of the exclusion. In the ensuing declaratory judgment action, New Life raised several arguments as to why the exclusion was inapplicable, most pertinently that the underlying work was not completed. Specifically, New Life argued that because the defective tire was installed pursuant to a contract requiring that a “reasonably safe tire” be placed on the customer’s vehicle, a question was raised as to whether it actually completed the contract. In other words, because New Life essentially breached the contract, albeit inadvertently, it did not actually complete its work for the purpose of the products-completed operations hazard.

The court rejected this argument, explaining that there is a difference between uncompleted work and work completed in a negligent fashion:

Claimants do not dispute that the Insureds selected and placed a tire on the vehicle. Nor have Claimants presented any evidence that work was ongoing — that New Life planned to continue to select an appropriate tire for Ms. Payne’s vehicle. The work that was to be performed by New Life was performed — a tire was selected and placed on the vehicle. Ms. Payne’s vehicle left the job site and the tires were put to use by Ms. Payne. New Life’s work did not come with a written warranty and the tire was sold “as is.” Thus, the work was completed but in an allegedly negligent fashion because the tire chosen by New Life was negligently selected. This is not the same as uncompleted work.

    Brian Margolies, Partner, Traub Lieberman Straus & Shrewsberry LLP

Read more at the Traub Lieberman Insurance Law Blog, Edited by Brian Margolies.

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