Commercial general liability (CGL) policies contain an exclusion known as the “your product” exclusion. The “your product” exclusion “excludes property damage to your product arising out of it or any part of it.” Stated differently, this exclusion is designed to bar coverage for damage to an insured’s product arising out of a defect with that product.
The “your product” exclusion, no different than other exclusions in a CGL policy, are difficult to comprehend without an example. Here is one:
You are a manufacturer of sliding glass doors. The sliding glass doors are sold to a glazing subcontractor that installs the doors in a high-rise condominium project. In installing the sliding glass doors, the glazing subcontractor adds a horizontal transom along the top of the doors. Subsequently, leaks begin to occur and the doors are deemed defective. A claim is asserted against you as the manufacturer of the doors and you notify your CGL insurer of that claim.
The CGL insurer denies coverage under the “your product” exclusion. The CGL insurer is saying that the CGL policy does not cover defects arising out of your product (the sliding glass doors) that damage your product. You counter that the by the glazing subcontractor installing the transoms along the top of the sliding glass doors, the doors no longer remained “your product” as they were altered by the subcontractor. But, is this really true? The installation of a transom did not fundamentally change the functionality of the sliding glass doors. The sliding glass doors still operated as sliding glass doors even with the installation of the transom. Thus, for you the manufacturer to argue around this “your product” exclusion, you would have to argue and show that the original product you manufactured was fundamentally altered so that it no longer functioned as the product you manufactured.
Exclusions in CGL policies are complicated. This is why it is important to consult with counsel in order to best navigate and try to create arguments around exclusions.
Please contact David Adelstein at email@example.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.