BOP Coverage and Property Damage Exclusions

We insure a distributor of metal brushes. The insured mistakenly sent a customer nickel coated brushes instead of stainless steel brushes. The customer installed the brushes into a machine and later realized the brushes were not stainless steel. The customer removed the brushes and tested the equipment for any damages or contamination from the nickel coating. No damages were found but the customer did incur loss of use of the equipment and expenses to remove the brushes and clean and test the equipment.

Under the terms of the BOP, would the your product exclusion or the recall exclusion or the impaired property exclusion apply?

Iowa Subscriber

The product exclusion is not applicable to the claim since that applies only to damage to the named insured's product and not to damage that the product causes to another's property.

The recall exclusion and the impaired property exclusion are both applicable. The recall exclusion applies to damages claimed for any loss or cost or expense incurred by others for the replacement or removal of the named insured's product if that product is withdrawn from use due to a defect or deficiency. The impaired property exclusion is applicable since it applies to property damage to property that has not been physically injured arising out of a defect or deficiency in the named insured's product, and that is the claim in this instance. So, both exclusions are going to prevent coverage for this particular damage claim.

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