Procedural Posture

Plaintiff contractor appealed a summary judgment from the Superior Court of San Joaquin County (California), which ruled in favor of defendant insurer in an action brought under a commercial general liability insurance policy.

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Overview

The insured, a manufacturer, supplied inadequate steel pile caps to the contractor for use in the construction of a water facility pumping plant. The contractor did not discover that the caps did not meet its specifications until after it had welded the majority of them to driven piles. The contractor modified the caps to meet design requirements and was able to complete the project on time. Because the modification of the caps slowed the completion of the project, however, the contractor did not receive any bonus for early completion. The contractor obtained a judgment against the insured and then sought to recover under the property damage provisions of the liability policy. The court held that the use of inadequate caps did not constitute physical injury to tangible property because the only injury shown was the welded structure’s failure to perform as intended. Property damage was not established by the mere failure of a defective product to perform as intended. Moreover, the costs for repairing and modifying the defective caps and for loss of the early completion bonus were not covered as loss of use of personal property because there was no loss of use of the water facility.