SDV Insights

Faulty Workmanship an Occurrence in Iowa - as Long as Other Property Damage is Involved


The Eighth Circuit recently weighed in on one of the more contentious issues in insurance coverage litigation: is faulty workmanship an occurrence? In Decker Plastics Inc. v. West Bend Mut. Ins. Co., the Eighth Circuit ruled that, under Iowa law, faulty workmanship is an occurrence – as long as it leads to other property damage.

Decker Plastics sold plastic bags to Al’s Inc., which used the bags to package landscaping materials. Al’s informed Decker that the bags would be stored in the sun and requested an ultraviolet inhibitor. Decker forgot to include the ultraviolet inhibitor and the bags deteriorated in the sunlight, leaving small shreds of plastic in the landscaping materials. As a result, Al’s had to clean the already-used materials at its customers’ sites, purchase replacement bags, and pay to clean its own property.

Al’s sued Decker, and Decker submitted a claim to its CGL carrier, West Bend, to recover the loss. West Bend denied the claim and Decker sued. The district court granted summary judgment for West Bend, ruling that there had not been an “occurrence” under Iowa law because the plastic bags were Decker’s own defective product and the losses were therefore foreseeable and expected.  However, the Eighth Circuit reversed, holding that the damage to other property besides the plastic bags was an occurrence under the policy.

This question has divided courts across the country, resulting in a patchwork of inconsistent results. To see how faulty workmanship is treated in your jurisdiction, see our survey: Defective Construction as an “Occurrence.”

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