The U.S. District Court for the Western District of Missouri has decided that an excess and surplus lines insurer does not have to defend a suit brought against a vape store by a customer who suffered severe burns after e-cigarette batteries exploded in his pocket. The case is Scottsdale Ins. Co. v. Vapor, No. 4:20-00328-CV-RK, 2021 U.S. Dist. LEXIS 5296 (W.D. Mo. Jan. 12, 2021).
Scottsdale Insurance Company issued an insurance policy to Aqueous Vapor, a vape shop. The policy contained a Commercial General Liability part and a Commercial Property Coverage part. While the policy was effective, a customer of Aqueous Vapor, Adam Williams, was injured just after he installed the batteries into his e-cigarette, when the battery exploded in his pocket. Williams suffered second- and third-degree burns which required extensive medical care, including skin grafts. When the explosion occurred, Williams was no longer on the premises of the vape shop.
Williams sued Aqueous Vapor for his injuries and the company sought coverage under its commercial insurance policy with Scottsdale, who denied coverage, citing the policy's products-completed operations hazard exclusion.
The policy provided coverage to Aqueous Vapor and any "insured" for "bodily injury" caused by an "occurrence" that takes place in the "coverage territory" during the policy period. The coverage territory is designated by the schedule of locations, a list of all stores including the store in question. The Declarations listed the "business description" of Aqueous Vapor as an "electronic cigarette store." When the policy was issued, Scottsdale was aware that Aqueous Vapor was in the business of selling e-cigarettes and e-cigarette supplies and products.
The judge granted Scottsdale's motion to dismiss the case, finding that the products-completed exclusion clearly precluded coverage. The products-completed exclusion requires the injuries to occur away from the premises and the injuries to arise out of the work or product of Aqueous Vapor. Here, Williams' injuries occurred away from the premises and the batteries were sold by Aqueous Vapor, so both requirements were satisfied and Scottsdale had no duty to defend or indemnify Aqueous Vapor in the underlying suit.