Equipment Damaged During Shipping

April 1, 2014

Insured was contracted to move some computer related items from company's office in Cincinnati to Minneapolis, including monitors, desktops, servers and routers. Insured states that two employees packed the equipment and shipped them through UPS. UPS did not pack the items. Upon arrival at the Minneapolis office, several packed and shipped items were damaged and destroyed. It is not disputed that the packing was poorly done causing the equipment to be damaged during the shipping process.

 

Would the K6 Exclusion of the Standard SS 00 08 04 05 Form – Business Liability Coverage Form, apply to this case? The K6 Exclusion reads: 6) That particular part of any property that must be restored, repaired or replaced because “your work” was incorrectly performed on it.

 

The debate arises over whether the property damaged was a result of our insured's work being performed incorrectly on it or whether the property damage occurred as a result of poor packing and would the packing be considered work incorrectly performed on the damaged property?

 

Ohio Subscriber

It is our interpretation of the facts and policy that the liability form is going to cover the claim here.

 

The definition of products-completed operations does not include BI or PD arising out of the transportation of property. So, the question is: did the PD arise out of the transportation or did it arise out of poor packing. I am inclined to say that the PD arose out of the poor packing, that is, the insured's work (in fact, the parties stipulate to this fact).

 

As for j6, the exclusion does not apply to PD included in the products-completed operations hazard and as I say, I don't think the wording of the definition is going to exclude this PD from being in the products-completed operations hazard area. So I don't see j6 applying as the PD occurred after the insured was finished with its work.

 

The damage to your work exclusion applies to PD included in the products-completed operations hazard. But, the PD here was not to the insured's work; it was to the customer's property. The insured's faulty work damaged another's property and that means the liability form is going to cover the claim. K.(6) does not apply to preclude coverage because (6) does not apply to PD included in the products-completed operation hazard (last paragraph of Section k. Damage To Property). Because the damage occurred after the insured completed his work, k.(6) does not kick this claim out of coverage.

 

The damage to the shipping contents was damage to another's property as a result of insured's faulty work. Thus, the liability form will cover this claim.