Property Damage Claim and Tangible Property Requirement

We have an insured that installed carpet for a hotel. After the installation was complete, the owner of the hotel rejected the work because the patterns in the carpet were not aligned, destroying the aesthetic look of the carpet. Attempts to pull up the carpet were not successful because the glue would damage the carpet if it was pulled up. The hotel owner wants the insured to purchase new carpet, remove the current carpet, and the install the new carpet.

Coverage was declined because of the policy exclusions, but in a discussion afterwards, a secondary question arose. The discussion centered on whether the loss triggered the insuring agreement under the CGL form since there was doubt that property damage even occurred. What is your opinion?

Texas Subscriber

Based on the description of the claim, it is our opinion that this is not property damage as defined in the CGL form. That definition requires either physical injury to tangible property or loss of use of tangible property that is not physically injured. That is not what happened here. The carpet was not physically injured and there was no loss of use just because the hotel owner did not like the looks of it. The carpet could have been used except for the owner's dislike for it and that is more of a warranty failure than a property damage occurrence. Aesthetic disapproval does not equate with damage to or loss of use of tangible property.

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