Page 8 - FINAL - Brouse IR Year-End Newsletter 2021_Neat
P. 8
2022 Ohio Supreme Court Update (Continued from page 7)
After this broad coverage grant, the policy to “your product” did not apply. This is
will usually include a battery of exclusions that because the ultimate damage was not to the
narrow the coverage. policyholder’s product—the tube scale—but to
its customers product—the glass bottles.
So, following this broad structure, a typical
insurance policy will give with one hand (the The insurers in Ironics disagreed with this
coverage grant) and take away with the other interpretation of the exclusion, arguing that it
(the exclusions). And because the coverage applied to the glass bottles because they were
grants are traditionally so broad, for most first- integrated products, such that the glass bottles
party and third-party risks, the question of were inseparable from the tube scale. But the
coverage comes down to the exclusions—that insurers also went further, questioning the
is, whether the other hand took away what was premise of whether the loss was insured in the
given in the coverage grant. first place.
But now, in a pair of insurance cases pending According to the insurers, regardless of whether
before the Ohio Supreme Court, insurers are the “your work” exclusion applied, the loss was
attempting to subvert this usual structure. not covered because it was not “fortuitous.”
Instead of focusing on whether the exclusions
apply, they argue that the risk does not fall in The Ohio Supreme Court first invoked the
the broad coverage grant in the first place. It “doctrine of fortuity” in Westfield Ins. Co.
v. Custom Agri Sys., Inc., 133 Ohio St.3d
does not matter, according to these insurers, 476, 2012-Ohio-4172, 979 N.E.2d 269, a
whether the exclusions took away coverage case holding that liability insurance does not
because as they argue, it was never given in the generally cover damages for claims of alleged
first place.
defective construction and workmanship to the
In Motorists Mutual Ins. Co. v. Ironics, Inc., insured’s own work. The Ohio Supreme Court
the policyholder sold defective tube scale to held that—to count as “property damage”
its customer. Tube scale is a product used to caused by an “occurrence”—the damage had
make glass bottles. Because the tube scale to be fortuitous.
was defective, the resulting glass bottles But it was not clear from Custom Agri what
were unusable. The policyholder’s customer the so-called fortuity doctrine added to the
demanded to be reimbursed for the damage. traditional analysis. It was always the case
The policyholder, in turn, tendered the claim to that general liability policies applied only to
its insurer, who denied the claim.
accidental damage. So, it was never clear what
Now, most liability policies have an exclusion a fortuity element added. It seems incoherent
for damages to “your product”—meaning to say that a loss could be accidental but not
the insured’s product. This makes sense, since fortuitous. But, if this is what the Ohio Supreme
liability policies in general cover damage to Court was holding—i.e., that there were non-
third-party property, not the policyholder’s fortuitous accidents—how were policyholders
property. (Those sorts of losses are covered by supposed to tell the difference? And what basis
first-party insurance, which is subject to its own was there in the policy language to distinguish
slate of exceptions.) between different types of accidents, fortuitous
on one side and non-fortuitous on the other,
In Ironics, though, the policyholder has a strong when the language of the coverage grant
argument that the exclusion for damages applied to all accidents?
(Continued on page 9)
8 Your Coverage Advisor
