Impaired Property Exclusion and Possible Future Losses

The insured's plastic buckles were incorporated into swimming suits manufactured by a customer. After installation, some of the buckles broke. The customer has made claim for the cost of removing and replacing all the buckles that had already been sewn into the swimming suits. We believe the exception to the impaired property exclusion applies to those swimming suits whose buckles actually broke, but does the exception also extend to all of the other swimming suits on which the buckle may not have yet broken?

Iowa Subscriber

In the situation you describe, the exception to the impaired property exclusion would not extend to all of the other swimming suits on which the buckles have not yet broken. For the exception to apply, there must have been sudden and accidental physical injury to the insured's product after it has been put to its intended use. Here, there has been no physical injury to buckles which have not yet broken, even if they might eventually break.

Also, possible future losses are not covered by the CGL form.

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