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.

Court of Appeals holds that allegation of bead-blasting is allegation of physical injury to property

I have been discussing Essex Ins. Co. v. BloomSouth Flooring Corp. in my last couple of posts.

Suffolk was the general contractor and BloomSouth was the subcontractor that installed the defective carpeting. Suffolk alleged in its lawsuit against BloomSouth that as a result of BloomSouth's installation of the defective carpet the concrete floor beneath the carpet had to be bead-blasted. The court interpreted that allegation as alleging "physical injury to property, viz, the concrete substrate."

The court held, more specifically, that the bead-blasting allegation was part of a remedial measure, not a replacement process. The decision does not explain why that distinction is important under the terms of the policy.

Court of Appeals holds that permeating odor may constitute a "physical injury"

As I discussed in my last post, in Essex Ins. Co. v. BloomSouth Flooring Corp. the United States Court of Appeals for the First Circuit discussed whether an insurer must defend a construction contractor against allegations that unpleasant odors emanated from a carpet the contractor installed.

The court first held that coverage was triggered because a permeating odor may constitute a "physical injury to tangible property" within the meaning of the policy.

I have seen this issue frequently arise in the context of fumes and airborne pollutants. No published Massachusetts appellate decision has addressed the issue. The Court of Appeals relied on two Superior Court decisions to predict that the Supreme Judicial Court would hold that an odor may be a physical injury.