Opinion ID: 516245
Heading Depth: 1
Heading Rank: 4

Heading: The Products Exclusion

Text: 44 Scottsdale argues that the products exclusion excludes coverage for damage to the water reservoir tank and the surrounding berm. The products exclusion states that insurance does not apply: 45 (n) to property damage to the named insured's products arising out of such products or any part of such products. 46 The policy defines named insured's products as: 47 [G]oods or products manufactured, sold, handled or distributed by the named insured or by others trading under his name including any container thereof 48 .... 49 The exclusion denies coverage for damages arising out of a defect in a product. It precludes liability for an insurer as a warrantor of the insured's products. Timberline Equip. Co. v. St. Paul Fire & Marine Ins. Co., 281 Or. 639, 643-44, 576 P.2d 1244, 1246-47 (1978). The exclusion has been interpreted to exclude coverage for damage to one component or part of a larger product. Id. at 643-44, 576 P.2d at 1247. 50 To exclude coverage under the products exclusion, Scottsdale must show that: (1) the damage was done to Fireguard's product, and (2) the damage arose out of Fireguard's products. 51 Under the policy's definition, the water reservoir tank is a product. Fireguard sold the tank to WKO, and handled it during the process of installation. However, the preparation of a site is not a product under the definition. Site preparation is not an object that can be conveyed from the insured to others, as the definition implies. Cf. Timberline, 281 Or. at 644, 576 P.2d at 1247 (defective guylines are part of a tower; therefore, products exclusion excludes coverage). Instead, it is the performance of a service. See Kissel v. Aetna Casualty & Surety Co., 380 S.W.2d 497, 506 (Mo.App.1964) (subcontractor's digging of foundations, grading a site, and backfilling and shaping the construction area after installation of the foundation is a service, not a product), Clements v. Aetna Casualty & Surety Co., 15 Ohio Misc. 252, 236 N.E.2d 799, 803 (1968) (a service, not a product, where contractor backfilled, flushed, and compacted a sewer trench after installation of a sewer line). 52 Even if the water reservoir tank is a product, however, there is no showing that the damage arose out of it. The complaint does not allege that the damage was caused by some defect in the water reservoir tank. Instead, the allegation is that the damage arose from soil instability caused by negligent and improper site preparation and installation by the subcontractor. First Amended Complaint at 3. Because these are services, not products, the products exclusion does not exclude coverage for the damage that occurred.