We insure a fertilizer application company under a CG 00 01 12 04 General Liability Coverage form. The insured utilized their listed equipment to apply seed and fertilizer to a customer's field in October. In December, the customer noticed that the seed/fertilize application was not completely uniform in its distribution across the field. They estimate that the application radius was short by 10% in its distribution. (i.e. the spreader was supposed to cover a 100 ft diameter behind the spreader, but only covered 90 ft.)
Members of our management team have differed on if coverage would apply under the insured's CGL policy. Some believe that this qualifies as "your work", and think that the improper application of the seed/fertilizer should be excluded. Others point to the Products Completed Operations Hazard and say that the 10% of the field that was not properly seeded and fertilized is the resulting damage and should be covered under that part of the policy. Other members think that the total yield of the field will be impacted, and that difference should reflect the damages owed.
Any thoughts?
Kentucky Subscriber
In the situation as described, the insured's work was inadequate, resulting in a loss of use of 10% of the property where the fertilizer was not applied.
This type of loss is excluded under m. Damage To Impaired Property Or Property Not Physically Injured, as follows:
"Property damage" to "impaired property" or property that has not been physically injured, arising out of:
(1) A defect, deficiency, inadequacy or dangerous condition in "your product" or "your work"; …
While many claims arise from some type of inadequacy, the details of any situation may trigger an exclusion that overrides the "products-completed operations hazard". In this situation, the misapplication of fertilizer makes the land "impaired property". Therefore, the exclusion for Damage to Impaired Property or Property not Physically Injured applies. The land wasn't physically injured, but there was an inadequacy in the insured's application of the fertilizer, which triggers the exclusion. There is no coverage for this loss.