Every so often, even frequently, we get coverage questions that make us wonder what is wrong with people. Lose a dollar, sue. Get mad, sue. Sue to get even. Sue to get revenge. Sue, Sue, Sue.
Our insured bred a litter of puppies. One of the puppies has tested positive for a congenital condition. The new puppy owner has sued the insured for delivery of a defective product. Is there coverage? Why or why not? I can see the potential for the argument that the [condition of the] puppy is not 'property damage' caused by 'an occurrence.' I also can see the argument that the failure to deliver a healthy puppy is a breach of contract. What are your thoughts?
My thought is that there is way too much time on the hands of the new puppy owner and his attorney. Another thought is that this is a waste of time of the parties, attorneys, and the court that has to hear it. A further thought is that it makes a pretty interesting coverage question.
I called the claim manager who sent the question, as I wanted some more facts. It turns out that the homeowner insured under a pre-2000 version of the homeowners HO-3 policy with a stud Labrador entered into a deal with the owner of a bitch Labrador to breed Little Labradors. The owner of the bitch paid $700 in stud fee and got pick of the litter.
Unfortunately, the pick of the litter picked had a congenital defect. The picker wanted his 700 bucks back. A vet confirmed that the defect had to be in both the doggie parents in order to pass to the offspring. The stud's owner said, "Since your dog is half responsible for the defect, I'll give you back half your money, or $350." The bitch's owner said, "No doggone bone here. I'll see your butt in court." Off he goes to file in small claim court. So, the homeowner goes to his insurance company and says, "Defend me."
Now, we are involving expensive attorneys to press a $350 vindictive suit. This will end up costing the insurer two or three thousand dollars if pressed, easily. Is this the best use of our legal system? Of our insurance system? What happened to the Good Neighbor policy?
But, I was asked the about insurance coverage for this event. Where does that stand?
Of course the HO-3 liability part covers judgment and defense costs "for damages because of 'bodily injury' or 'property damage' caused by an 'occurrence.'" Occurrence is a defined term, meaning an accident. Property damage also is a defined term, meaning physical injury to, destruction of, or loss of use of tangible property. (Mind you, bodily injury does not apply, because animals are chattel, or property, not human, and so damage to an animal is property damage, not bodily injury, except in some cities in California where pets are deemed human.)
Where is the occurrence and where is the property damage? An occurrence is an accident. Where is the occurrence here? At the time of the agreement? At the mating (which would be an intentional act and not an accident)? At the birth of the puppy?
The point is, the insurance policy is not a guarantor of products. You could not make a Christmas ornament in a craft class, sell it for a few bucks, and then turn to your insurance carrier when the purchaser says that the thing was made badly and will not hang from the tree. It is not a guarantor of the birth of a defective puppy either.
This is wrong from a few other perspectives, as well. What about the business pursuit exclusion? Couldn't that be applied if the breeding led to profit for the homeowner? As to contractual liability (that the homeowner had an implied contract to deliver a healthy puppy), contractual liability in the HO form is very narrow, covering only maintenance or service agreements related to the premises or certain hold –harmless agreements.
Maybe I'm just ornery today, but this is a stupid case; not the claim, the homeowner has the right to tender defense of suits to the carrier, but only for a covered loss — which this is not.
Ah, can't we all just get along?
Bruce Hillman is editorial director, Professional Publishing Division, of the National Underwriter Co.
The FC&S Claim Queue is prepared and written by the editorial staff of The Fire, Casualty and Surety (FC&S) Bulletins, the most widely used encyclopedic reference service devoted to insurance policy interpretation and coverage topics. FC&S is published by The National Underwriter Company. The editors welcome comment at fcs@nuco.com. For more on FC&S, visit www.fcsbulletins.com
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