Exclusions for faulty workmanship & recalls rejected (US)

Patrick Bracher from Norton Rose Fulbright.

A Los Angeles court found the insurer liable for a damaged shipment of corn syrup, rejecting the defences that two exclusions for precautionary recalls and faulty workmanship resulting in goods being restored, repaired or replaced applied because the damaged corn syrup was not recalled. It was just sold for a lower price.

The corn syrup had been overheated forcing the owners to sell the shipment at a reduced rate. The damaged corn syrup was therefore never ‘restored, repaired or replaced’ as required by the workmanship exclusion nor was it a precautionary recall. The insurers were liable for $670 000.

[The case is Travelers Property Casualty Co v USA Container Co.]

First published by Financial Institutions Legal Snapshot.