Tuesday, May 12, 2009

Court of Appeals holds that odor does not come within impaired property exclusion

Returning to Essex Ins. Co. v. BloomSouth Flooring Corp. which I have been discussing in my last several posts, the court turned next to the business risk exclusions.

The court held that the impaired property exclusion did not exclude coverage. That exclusion excludes property damage to property that has not been physically injured.

The court held that the allegation that the odor permeated the building was an allegation that the odor physically injured the property.

Pursuant to the terms of the policy the impaired property exclusion applies only to property that can be restored to use by "the repair, replacement, adjustment or removal of the insured's product or work."

The court interpreted the complaint as suggesting that the property could not be restored simply by removing, replacing, adjusting or removing BloomSouth's product or work. Rather, the complaint alleged that Suffolk attempted to remediate the odor by installing carbon air filters to the ventilation system in the building.

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