The pairing between adjusters and agents is often a peaceful co-existence, but it may suddenly be disrupted by tenacious disagreements.

Recently two examples crossed the Independent Insurance Agents & Brokers of America Virtual University radar. Read the two stories, condensed for brevity and clarity, below:

A manufacturer shipped a large quantity of a liquid product to a customer. For convenience in either shipping or processing, the shipment arrived at the customer in multiple containers, which the customer combined into a single batch. Upon testing, the entire shipment was found to be defective and had to be discarded. Naturally, the customer refused to pay the invoice for the liquid until it was fully replaced with an acceptable replacement. The manufacturer, in searching for the error, found that although nearly every separate container had tested as correct prior to shipping, at least two were mislabeled or improperly included from a rejected batch. The manufacturer turned to its Commercial General Liability form (ISO CG 00 01 04 13) and requested the insurer pay for the financial loss of the first shipment. The carrier denied the entire claim, citing Exclusion k:

This insurance does not apply to:

k. Damage To Your Product

“Property damage” to “your product” arising out of it or any part of it.

The manufacturer and its agent did not totally disagree, but argued the exclusion should only apply to the defective parts of the shipment. Under this argument, the carrier should pay the amount of the claim for any portions of the shipment that the manufacturer could document were satisfactory. This, they explained, would have been exactly how the carrier would have paid the claim if the customer had not rendered the entire shipment useless by mixing the defective and good batches together. The carrier rejected this argument, again denying the entire claim.

There is one key element of evidence missing in the discussion. Exclusion k. clearly excludes any property damage to “your product.” Is that term also defined by the Commercial General Liability form? Ah, so it is, as follows:

21. “Your product”:

a. Means:

1. 1. Any goods or products, other than real property, manufactured, sold, handled, distributed or disposed of by:

(a) You;

(b) Others trading under your name; or