Coverage for Compromised Chemicals under the CGL

April 24, 2017

Our operations include the blending and subsequent sale of chemicals, mainly consisting of insecticides and fungicides to farmers (who would actually do the application to the crops). We normally acquire these chemicals from wholesale companies and then sell them to farmers. These chemicals are sold in drums.

One of our customers has requested proof of commercial general liability coverage. Specifically, they want certification that our CGL coverage would cover a situation in which we negligently sold rancid chemicals to farmers. From reviewing our insurance policy it is my understanding that our policy would cover any crops that were actually damaged (stunted growth) by the chemicals under the Property Damage Liability/Product's Completed Operations Coverage. What I am unsure about is the situation in which a farmer sues for economic loss with or without there being actual visible damage to the plant itself. Right off hand I cannot find a specific provision in the policy that would preclude or exclude coverage for this. Also it would be very difficult for a claims adjuster to separate the economic loss from the tangible loss.

Also, is there another coverage available that would cover the aforementioned situation?

Indiana Subscriber

This damage would not be covered under the CGL due to the Damage to Impaired Property or Property Not Physically Injured exclusions. Although the property was not damaged, there was a defect in the product (the compromised chemicals) and a failure to perform the contract in accordance with the terms by the insured (failure to provide good chemicals). The experts do not see any endorsement that would cover this damage. Any coverage would have to come from a specialty form.

 

 

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