Court Opinion

ID: 9478657
Source: CourtListenerOpinion
Date Created: 2023-08-05 06:54:10.918548+00
Date Added: 2024-06-11T17:46:32.531327
License: Public Domain

JAMES HUNTER, III, Circuit Judge,
concurring in part and dissenting in part.
I respectfully dissent. While I agree with the majority that Aldan’s appeal is timely, I cannot concur with its conclusion that exclusion (m)(2) of the Aldan-Puritan insurance policy and exclusion (h)(2) of the Aldan-Twin City insurance policy excuses Puritan and Twin City from defending Aldan in the suit brought by East-Wind. Unless I am mistaken, this case is resolved by our recent decision in Imperial Cas. & Indem. Co. v. High Concrete Structures, Inc., 858 F.2d 128 (3d Cir.1988), and not Unifoil Corp. v. CNA Ins. Cos., 218 N.J. Super. 461, 528 A.2d 47 (App.Div.1987).
The exclusion in the Aldan-Puritan policy states:
This insurance policy does not apply:
(m) to loss of use of tangible property which has not been physically injured or destroyed resulting from:
*650(1) a delay in or lack of performance by or on behalf of the named insured of any contract or agreement, or
(2) the failure of the named insured’s product or work performed by or on behalf of the named insured to meet the level of performance, quality, fitness or durability warranted or represented by the named insured; but this exclusion does not apply to loss of use of other tangible property resulting from the sudden and accidental physical injury to or destruction of the named insured’s product or work performed by or on behalf of the named insured after such products or work have been put to use by any person or organization other than an insured.
The language in exclusion (h)(2) of the Aldan-Twin City policy is identical.
In the underlying action, East-Wind has sued Aldan for negligence, breach of implied warranty, and breach of express warranty. East-Wind alleges that as a result of Aldan’s defective waterproofing, 300,000 square yards of material was ruined.
Parsing the language of the exclusion, I agree with all the parties and the district court that the phrase “loss of use of tangible property” refers to the East-Wind’s material, subsequently made into parkas. As was the case in High Concrete Structures, “the purchaser [East-Wind through Tan-Tex Industries] created a new product [coated material] having a value in excess of the value of the product supplied by the insured [waterproofing], and suffered damage to more than just the insured’s product.” High Concrete Structures, 858 F.2d at 134-35 (citing Pittsburgh Plate Glass Co. v. Fidelity & Cas. Co. of NY, 281 F.2d 538, 541 (3d Cir.1960)).
The critical question in interpreting the exclusion in this case is whether East-Wind’s material was “physically injured.” If East-Wind’s material was physically injured, then the exclusion does not apply. Id. at 136. On the other hand, if East-Wind’s material was not physically injured, then there is no insurance coverage for the “loss of use of tangible property ... resulting from: (2) the failure of the named insured’s product ... to meet the level of performance, quality, and fitness or durability warranted or represented by the named insured_” Majority at 649 (excerpting from exclusion (m)(2)).
In High Concrete Structures, we held that an identical exclusion did not apply because the final products, washers, were physically injured; the washers were damaged and hence useless. Id. at 136. I do not see how this case, where East-Wind’s property was also damaged, is any different from High Concrete Structures. Since the damaged goods did not belong to the insured, the exclusion does not apply.
Finally, the district court’s reliance on Unifoil is misplaced. Unlike Aldan, which produced only the waterproofing, the insured in Unifoil produced the entire coated product. Consequently, in applying the exclusion, the Appellate Division relied heavily on the fact that there was no injury “to other tangible property;” all that was harmed were “intangible enhancements” of the insured’s property. Unifoil, 218 N.J. Super, at 469-71, 528 A.2d at 51-53. East-Wind’s complaint thus is dispositively distinguishable from the underlying complaint in Unifoil because East-Wind’s material was hardly an “intangible enhancement” of Aldan’s waterproofing and because East-Wind’s material was not, according to High Concrete Structures, Aldan’s product.
In sum, East-Wind’s material has allegedly been physically injured by Aldan’s substandard waterproofing. Consequently, Aldan’s insurers, Puritan and Twin City, have a duty to defend as the plain language of the exclusion at issue and our recent decision in High Concrete Structures demonstrate. Therefore, I dissent.1

. Because the district court did not consider the application of the sistership exclusion, I would remand to the district court.