Opinion ID: 203772
Heading Depth: 3
Heading Rank: 2

Heading: Exclusion (k)[8]

Text: The magistrate judge found that coverage for the claim for damage to the concrete floor was barred by exclusion (k), which proscribes coverage for Property damage to `your product' arising out of it or any part of it. The definition section of the policy provides: `Your Product' means a. Any goods or products, other than real property, manufactured, sold, handled or distributed or disposed of by: (1) You; (2) Others trading under your name; or (3) A person or organization whose business or assets you have acquired The language employed by the exclusion does not relieve Essex of its duty to defend. Where, as here, the complaint alleges damage to real property the exclusion cannot apply because it excludes coverage only for damage to goods or products, other than real property. See CU Lloyd's of Texas v. Main St. Homes, Inc., 79 S.W.3d 687, 697 (Tex.App.2002) (agreeing with another court that the definition of `your product' in a similar exclusion does not apply to a building and its components). In this case, Suffolk's complaint alleged damage to real property, specifically, BFDS's concrete floor. In addition, the policy further defines the insured's product as any good or product manufactured, sold, handled or distributed or disposed of by the insured or the insured's agents. There is no indication in this case that BloomSouth or its subcontractors manufactured, sold, handled, or distributed or disposed of the concrete floor. [9] The district court elided the policy language by reasoning that the concrete floor became BloomSouth's product, thus bringing Suffolk's claim within the reach of exclusion (k). The court stated, BloomSouth's `product' and `work' includes the Subcontract's requirements for the [concrete] subfloor even though BloomSouth did not build the [concrete] subfloors, and BloomSouth's `product' of labor and/or materials damaged the surface of the subfloors, which were also within BloomSouth's product. We reach a different conclusion. As opposed to the carpet itselfwhich BloomSouth concedes is its product the pre-existing building structures, including the concrete subfloor over which the carpet was to be installed, are real property, and are thus excluded from the definition of product. Two Massachusetts appellate decisions inform this conclusion. In Frankel, the court found that damage to the superstructure of a farmhouse caused by the insured's faulty construction of a foundationonto which the farmhouse was to be movedcould be the basis of a covered claim because it distinguished between damage to the work product of the insured (the foundation) and damage to larger units of which the insured's work product is but a component. 484 N.E.2d at 105-06 (citations omitted). In addition, despite a finding that coverage did not exist, Mello Construction, Inc. v. Acadia Ins. Co., 874 N.E.2d 1142, 2007 WL 2908267 (Mass.App.Ct.2007)(unpublished), is also instructive. In Mello, the insured general contractor sought coverage for allegations that it or its subcontractor improperly installed a concrete slab as part of a school construction project. Id. at   . The insured had to fix the slab, as well as perform repairs to paint, mechanical systems, and floors, and sought reimbursement from the carrier. Id. at , . The insured relied on Frankel, but the court distinguished it because the insured's work product, as general contractor, encompassed the entire elementary school. Concluding that the entire school was the insured's particular work, the court found no coverage. Id. at -6. The circumstances here are more akin to those in Frankel than to those in Mello. Like the foundation in Frankel, the carpet was but a component, while the underlying complaint alleged damage to the larger unit. [10] Additionally, we do not believe that an insured would reasonably understand exclusion (k) to bar coverage for property damage to third-party property such as the subfloor, that was, at all times, part of the building in which it was working in just the same way as the walls, ceilings and windows. The court's conclusion that the subfloor became BloomSouth's product stretches too far the contours of what an insured might reasonably understand. Essex, for its part, gives us no good reason to affirm the court's decision regarding exclusion (k). Specifically, Essex fails to offer any reasoned argument in support of the court's conclusion that the concrete floor became BloomSouth's product for purposes of the exclusion. Instead, Essex states that The defective carpet is clearly BloomSouth's product. Just as clearly, it does not constitute real property. While we may agree with Essex on this point, BloomSouth's argument is that Suffolk's complaint may be reasonably construed as alleging that the carpet caused damage to a third party's real property-BFDS's concrete floor. Essex's statement is not responsive to this argument. In sum, we conclude that exclusion (k) does not relieve Essex of its duty to defend, and summary judgment for Essex on this basis cannot be sustained. Again, as was the case with the complaint of a permeating odor, we express no opinion on the question of whether Essex will ultimately be required to indemnify BloomSouth for the damage caused to the concrete floor.