Court Opinion

ID: 4015611
Source: CourtListenerOpinion
Date Created: 2016-07-14 14:07:25.679529+00
Date Added: 2024-06-11T14:05:06.567644
License: Public Domain

NOT FOR PUBLICATION WITHOUT THE
                    APPROVAL OF THE APPELLATE DIVISION

                                          SUPERIOR COURT OF NEW JERSEY
                                          APPELLATE DIVISION
                                          DOCKET NO. A-5589-13T3

PHIBRO ANIMAL HEALTH
CORPORATION,
                                                APPROVED FOR PUBLICATION

     Plaintiff-Appellant,                            July 14, 2016

v.                                                APPELLATE DIVISION

NATIONAL UNION FIRE INSURANCE
COMPANY OF PITTSBURGH, PA,

     Defendant-Respondent.
____________________________________

            Argued February 29, 2016 – Decided July 14, 2016

            Before    Judges        Sabatino,       Accurso      and
            O'Connor.

            On appeal from the Superior Court of New
            Jersey, Law Division, Bergen County, Docket
            No. L-0538-12.

            Steven J. Pudell argued the cause for
            appellant (Anderson Kill, P.C., attorneys;
            Mr. Pudell and Janine M. Stanisz, on the
            briefs).

            Mark D. Sheridan argued the cause for
            respondent (Squire Patton Boggs (US) LLP,
            attorneys; Mr. Sheridan, Jason F. King and
            Sean P. Neafsey, on the brief).

     The opinion of the court was delivered by

SABATINO, P.J.A.D.

     This    case    is     about   insurance     coverage    and    undersized

broiler chickens.         The insured, Phibro Animal Health Corporation
("Phibro"), appeals the trial court's decision granting summary

judgment to the insurer, defendant National Union Fire Insurance

Company   ("National      Union").        Phibro,     an     animal    product

manufacturer, sought a declaratory ruling that National Union

was required to provide coverage for economic losses sustained

by three of Phibro's customers.           The customers raised broiler

chickens for human consumption.          The growth of the chickens was

stunted because they had ingested a Phibro drug intended to

control a common intestinal disease.

    The trial court found there was no covered "occurrence" or

"property damage" under the insuring clauses of the National

Union policies.    The court also found the policies' "impaired

property" exclusion barred coverage, but that the contractual

liability and professional liability exclusions did not apply.

In addition, the court ruled Phibro had waived its right to

indemnification   for   customer     claims    that   Phibro    had    settled

without National Union's consent.

    For   the   reasons    that   follow,     we   reverse    the     grant   of

summary judgment to National Union.            Applying the controlling

principles of coverage law to the terms of National Union's

policy and the factual record, we conclude the circumstances

here qualify as both a covered occurrence and property damage.

                                     2                                 A-5589-13T3
We also rule the economic loss doctrine does not bar coverage of

these claims.

       The   question    of    potential        exclusion,    however,      must    be

remanded to the trial court for further consideration.                      We agree

with   the    court's    ruling     that       the   contractual     liability     and

professional liability exclusions do not apply.                       However, the

present      factual    record       is     inadequate       from     the    written

submissions      to   determine     whether      the   affected     chickens   could

have been "restored to use" so as to fall within the impaired

property exclusion.           If, on remand, the trial court determines

on a fuller factual record that the impaired property exclusion

does not bar coverage, it must then evaluate whether Phibro's

settlements      with   its    three      customers,     which      National   Union

declined to indemnify, were reasonable.

                                           I.

       Phibro,    a   maker    of   animal      health   products,     purchased     a

Commercial General Liability Insurance policy (the "CGL policy")

and an Umbrella Prime Insurance policy (the "Umbrella policy")

(together, "the policies") from National Union for the policy

period of April 1, 2010 through April 1, 2011.                        The standard

insuring clauses for bodily injury and property damage liability

under the CGL policy provided insurance coverage for "sums that

the insured becomes legally obligated to pay . . . because of

                                           3                                A-5589-13T3
. . . 'property damage' to which this insurance applies."                              The

CGL policy had a limit of liability of $2,000,000 per occurrence

and $4,000,000 in the aggregate.                 The Umbrella policy provided

coverage    of    $25,000,000      for    liability       in    excess     of   the   CGL

policy limits.          The policies specified various exclusions to

which the insurance would not apply.

     In the summer or fall of 2009,1 Phibro began selling a

product known as Aviax II ("Aviax") in the United States as an

additive    for    chicken       feed.      Aviax       is     designed    to   prevent

coccidiosis, a protozoal parasitic disease.

     In the spring of 2010, three Phibro customers reported that

although Aviax had successfully prevented coccidiosis, it also

stunted    the    growth    of    their    chickens.            The   stunted    growth

resulted in lower meat production, increased feed costs, and

increased     processing         costs.    The        undersized      chickens        were

nevertheless sold for human consumption, although not at the

sizes normally anticipated.

     From August 2010 through August 2011, Phibro funded four

studies     at    the     University       of        Georgia    and    a    commercial

performance       study    in     Mexico        to     determine      if    Aviax      had

contributed to the adverse effects reported by its customers.

1
  The record is inconsistent as to the actual time when Aviax was
introduced into the market.

                                           4                                    A-5589-13T3
Based on those       studies, Phibro concluded that Aviax had, in

fact, "caused a significant decrease in feed consumption and

poor    conversion    of    the    feed    the    birds     consumed       to    meat,"

resulting in stunted growth.                  According to Phibro's counsel,

Phibro has not marketed Aviax in the United States since these

events, and does not intend to resume doing so until the issues

that led to the damage are resolved.

       In   August   2010,    Phibro      filed    a    notice   of    claim         with

National Union's affiliate, Chartis Insurance Company,2 regarding

Phibro's      potential    liability      for    customer    claims    related          to

Aviax   and    National    Union's     potential       obligation     to   indemnify

Phibro.     None of those claims were by any individual consumers

who had purchased chickens.

       Phibro notified National Union in September 2010 that the

alleged damages relating to Aviax exceeded the $2,000,000 limit

of the CGL policy.          Phibro requested authority to settle with

one    of   the   three    customers,     identified      anonymously           in   this

record as Customer A.3            National Union responded that it would

2
  Although the investigation and processing of Phibro's claim was
conducted by Chartis on behalf of National Union, for simplicity
we refer at all times to National Union rather than to Chartis
as its affiliate.
3
  Phibro's customers have been fictitiously designated as "A,"
"B," and "C" by the parties to protect their identities.    The
                                                    (continued)

                                          5                                     A-5589-13T3
not consent to the settlement.                Nevertheless, Phibro proceeded

with the settlement, and issued a check to Customer A for its

claimed losses.

     In October 2010, National Union responded to the notice of

claim, informing Phibro that it had "undertaken an investigation

to   determine     whether       there      may    be    coverage     under        [the

policies.]"        The     investigation          was    "subject     to       a   full

reservation of [National Union's] rights . . . including . . .

the right to assert that [it] has no duty to defend or indemnify

Phibro."

     National     Union    hired     Morgan    Johnson       Carpenter     &   Company

("MJC"),    a   forensic       accounting     firm,     to   review   the      damages

claimed by the three customers.              MJC issued reports in June 2011

for Customers A and B, and in July 2011 for Customer C.                              MJC

determined      that,    due    to   increased        feed    costs   and      smaller

chickens,    Customer     A    sustained      losses    of    a   certain      amount,

Customer B sustained losses of a higher amount, and Customer C

sustained losses of an even higher amount.

     In December 2011, National Union orally informed Phibro at

a meeting that it would deny coverage for the claims and losses.

The record does not contain formal documentation from National

(continued)
record is sealed in that respect pursuant to a confidentiality
order.

                                         6                                     A-5589-13T3
Union denying such coverage, although the denial is undisputed.

      Thereafter, in January 2012, Phibro filed a product defect

report4    with       the     United    States        Food    and     Drug    Administration

("FDA").        Among other things, the FDA submission reported that

"[p]erformance changes (compared to historical                               [levels]) were

the   only      adverse       effects       that     were     noted"      after       Aviax    was

included in the customers' chicken feed.                              The submission also

stated that "there were no coccidiosis problems and no increases

in flock mortality."

      Having      been      rebuffed        by   National        Union,      Phibro     filed    a

complaint        in   the      Law    Division        in     January      2012,       seeking    a

declaratory judgment that National Union is obligated under the

policies to provide coverage for the property damage sustained

by Customers A, B, and C.                   Phibro further alleged that National

Union     had    breached        the    insurance          contract       and   the     implied

covenant of good faith and fair dealing.                              The complaint sought

compensatory and punitive damages.

      Meanwhile,         in    July    2012,         Customer     B    filed      a   complaint

against Phibro in the court of another state, alleging that

Aviax had stunted the growth of its chickens, causing damages.

Customer     B    pled      causes     of    action        for   negligence,          breach    of

4
  The full title of the report is "Veterinary Adverse                                         Drug
Reaction, Lack of Effectiveness, Product Defect Report."

                                                 7                                      A-5589-13T3
express and implied warranties, and strict liability.                           National

Union notified Phibro that it would defend the insured in that

lawsuit,      but   reserved     its     right    to    deny    coverage       under    the

policies.        National      Union's     motion       to   stay     the   New    Jersey

proceedings      pending     the    outcome      of     Customer     B's    lawsuit     was

denied.

       Subsequently,       National      Union     moved     for     summary    judgment

seeking a declaration that it has no obligation to cover Phibro

for   these    claims.         Phibro    cross-moved         for    summary    judgment,

urging an opposite declaration finding coverage.

       On June 24, 2014, the trial court issued a written decision

granting National Union's motion, and denying Phibro's cross-

motion.     The court concluded that the alleged losses sustained

by    Phibro's      customers      did   not     constitute        "property      damage"

caused by an "occurrence," as those terms are defined in the

insuring clauses of the policies.                 The trial court reasoned that

because    the      chickens    "were     not    physically         injured    and     were

subsequently sold for human consumption," there was no "property

damage" sustained.

       Further,      the   trial    court       found    that      Phibro's    customers

sustained      purely      economic      losses       and    are    thus    limited      to

contractual remedies under what is described in case law as the

"economic loss" doctrine.                Finding the damages "were entirely

                                            8                                     A-5589-13T3
foreseeable,"        the   court      concluded       that       tort    remedies        are

unavailable to Phibro's customers.                   Citing our Supreme Court's

opinion in Weedo v. Stone-E-Brick, Inc., 81 N.J. 233, 240-41

(1979), the court ruled that "[u]nder New Jersey law, breaches

of contract, without the potential for tort liability, do not

qualify as an 'occurrence' under general liability policies."

      The   trial     court    also      ruled      that     even       if    there    were

potential   coverage       under   the    insuring        clauses,       the      policies'

"impaired property" exclusion also bars Phibro's claim.                                  The

court did, however, find the separate "contractual liability"

and   "professional        liability"     exclusions         invoked         by   National

Union do not apply.

      Lastly, the trial court held Phibro waived its right to any

indemnification       by   National      Union      for    any    claims      related     to

Customer    A   by    settling     with      that    customer       without        National

Union's consent.

      Phibro    appealed.        In    the       meantime,   Phibro          settled   with

Customer B in July 2014, resulting in the dismissal of Customer

B's lawsuit.         Phibro has also since settled with Customer C.

The amounts and details of these settlements are not disclosed

in the record, and they do not bear upon our analysis.

                                             9                                     A-5589-13T3
                                   II.

       We review the issues raised on appeal by Phibro employing a

de novo standard of review.          We apply that standard for two

reasons.    First, the challenged rulings were made in an order

granting summary judgment, determining that National Union is

entitled to dismissal of Phibro's complaint as a matter of law.

W.J.A. v. D.A., 210 N.J. 229, 237-38 (2012) (instructing that

appellate courts review orders granting summary judgment on a de

novo   basis).      Second,    "[b]ecause      the   interpretation      of    an

insurance contract is a question of law . . . the trial judge's

coverage determination [is reviewed] de novo."               Ohio Cas. Ins.

Co. v. Island Pool & Spa, Inc., 418 N.J. Super. 162, 168 (App.

Div.), certif. denied, 206 N.J. 329 (2011).

       Certain   overarching    tenets    of    coverage    law   guide       our

analysis.        "[W]ell-settled         principles        governing          the

interpretation of contracts of insurance . . . mandate broad

reading of coverage provisions, narrow reading of exclusionary

provisions, resolution of ambiguities in the insured's favor,

and    construction   consistent    with       the    insured's   reasonable

expectations."     Sealed Air Corp. v. Royal Indem. Co., 404 N.J.

Super. 363, 375 (App. Div.), certif. denied, 196 N.J. 601 (2008)

(quoting Search EDP, Inc. v. Am. Home Assurance Co., 267 N.J.

Super. 537, 542 (App. Div. 1993), certif. denied, 135 N.J. 466

                                    10                                 A-5589-13T3
(1994)).        In addition, an insurance policy "must be considered

as a whole and effect given to every part thereof."                              Herbert L.

Farkas    Co.    v.    N.Y.    Fire    Ins.    Co.,    5 N.J. 604,   610     (1950).

"Generally, [the policy] should be interpreted according to its

plain and ordinary meaning."                  Voorhees v. Preferred Mut. Ins.

Co., 128 N.J. 165, 175 (1992).

                                            A.

      We begin with an examination of what are commonly known as

the   "insuring        provisions"     of     National      Union's     policies.         In

particular, we consider whether the losses associated with the

growth-stunting          effects       of        Phibro's      product           constitute

"occurrences" and "property damage" within the meaning of the

insuring provisions.            Unlike the trial court, we conclude they

do.   On a related point, we part company with the trial court's

finding     that       the    liability       claims       against    Phibro       by    its

customers       are,     by    their    inherent       nature,       outside       of    the

policies' scope of coverage under the so-called "economic loss"

doctrine.

                                            1.

      The policies afford coverage for "sums that the insured

becomes legally obligated to pay" for "'property damage' . . .

caused by an 'occurrence.'"               "Occurrence" is defined by the CGL

policy     as    "an     accident,      including          continuous       or     repeated

                                            11                                     A-5589-13T3
exposure to substantially the same general harmful conditions."

The term "accident," as it is used within the concept of an

occurrence, is not defined in the policies.                        Hence, we turn to

case law for guidance on that latter term.

    Our     Supreme       Court   has    recognized         that       "the    accidental

nature of an occurrence is determined by analyzing whether the

alleged    wrongdoer      intended      or    expected      to   cause        an    injury."

Cumberland    Mut.    Fire    Ins.   Co.      v.   Murphy,       183 N.J. 344,    349

(2005) (citing Voorhees, supra, 128 N.J. at 183).                                  A covered

"accident,"       under    this   conceptual         approach,          "includes          the

unintended consequences of an intentional act, but not an injury

that is, itself, intended."             Ibid. (citing Voorhees, supra, 128

N.J. at 182).

    A pivotal question under the insuring clauses here is thus

whether the stunted growth of the chickens allegedly caused by

their consumption of Aviax was an "accident."                           National Union

contends    the    undersized     chicken         problem    was       not    accidental,

because that adverse side effect could have been a foreseeable

consequence of the chickens ingesting Aviax.                           We reject that

argument for several reasons.

    The Supreme Court has not declared that foreseeability, at

least in the broadest sense of that term, is an all-purpose

litmus test for treating harms as non-accidental for purposes of

                                             12                                      A-5589-13T3
coverage       analysis.        For   instance,    a    prudent    individual       who

purchases insurance in case some form of accident might occur in

the future does not lose that protection just because he or she

can "foresee" in the abstract a possible need for coverage.                          If

foreseeability were construed that broadly to disallow coverage,

then no sensible person would ever pay a premium.

    We recognize that our case law                     in coverage disputes at

times    has     looked    to    whether    an    unintended      consequence       was

"expected" by an insured.             See, e.g.,       Voorhees, supra, 128 N.J.

at 183; Broadwell Realty v. Fid. & Cas. Co., 218 N.J. Super.
516, 534 (App. Div. 1987).             Even so, the factual record does not

demonstrate that Phibro expected, foresaw, or anticipated the

growth    of    its    customers'      chickens    would   be     stunted   if     they

ingested Aviax.

    To the contrary, the record suggests Phibro was caught off

guard by this adverse side effect.                     A manufacturer naturally

would not have wanted to market this feed additive if it knew in

advance    its        customers'      chickens    would    experience       such     an

undesirable reaction.              In this regard it is instructive that

Phibro has stopped selling Aviax in the United States despite

its effectiveness for its intended purpose.

                                           13                               A-5589-13T3
       In   sum,     the    law   and    the       record       amply    support      Phibro's

argument that the stunted growth of the Aviax-ingesting chickens

was a non-accidental "occurrence" under the policies.

                                              2.

       We reject National Union's contention there was no covered

"occurrence"        here    because     the    harm       to     the     affected     chickens

resulted in only economic losses.                        National Union, as did the

trial court, largely relies upon the Supreme Court's opinion in

Weedo, supra, 81 N.J. at 240-41, involving the construction of a

form    CGL      policy     issued    in   1973          by    the     Insurance      Services

Organization ("ISO").5               For several reasons, National Union's

reliance on Weedo is misplaced.

       In   Weedo,     a    masonry     contractor            was     sued    for   breach    of

contract      and    faulty    workmanship.              Id.     at    235.     The    damages

claimed were "the cost of correcting the work itself."                                    Ibid.

The    contractor      sought        defense       and    indemnification             from   its

insurer under a CGL policy that required the insurer to pay "on

behalf of the insured all sums which the insured shall become

legally obligated to pay as damages because of . . . property

damage      to      which     this      insurance             applies,       caused     by    an

5
  "The [ISO] is an association of domestic property and casualty
insurers.   One of the ISO's services is to develop standard
policy forms for member insurers."    E.I. Du Pont de Nemours &
Co. v. Admiral Ins. Co., 711 A.2d 45, 52 n.7 (Del. Super. Ct.
1995).

                                              14                                       A-5589-13T3
occurrence."           Id.    at    237    (emphasis            omitted).       The   1973        ISO

policy        considered       by    the       Court       in      Weedo     also     contained

exclusionary          clauses,      referred      to       by    the    Court    as   "business

risk" provisions, which barred coverage for "property damage to

the named insured's products arising out of such products or any

part     of    such     products"         (the       so-called         "insured's      product"

exclusion)       and    "property         damage      to    work       performed      by     or   on

behalf of the named insured arising out of the work or any

portion       thereof,       or     out    of    materials,            parts    or    equipment

furnished        in     connection         therewith"             (the      so-called         "work

performed" exclusion).              Id. at 241.

       The Court in Weedo observed that harms to a dissatisfied

customer stemming from the insured's faulty goods or work are

potentially compensable under contract law, and thus comprise a

"business       expense,      to    be    borne       by    the       insured-contractor          in

order to satisfy customers."                     Id. at 239.             It recognized that

the "business risk" exclusions were "intended to convey this

concept," id. at 241, and that the exclusions were "a valid

limitation upon standard, readily-available liability insurance

coverage."       Id. at 245.

       Weedo does not control the interpretation and application

of   the      insuring       clauses      in    National          Union's      policies       here.

Importantly,          the    Supreme      Court      did        not    adjudicate     in      Weedo

                                                15                                         A-5589-13T3
whether there was an "occurrence" under the policy, because the

insurer had "conceded . . . that[,] but for the exclusions in

the policy, coverage would obtain."                Id. at 237-38 n.2.

      Contrary to National Union's assertions, Weedo did not hold

that "the consequences of not performing well were not covered

and were to be borne by the insured," under the general insuring

clauses of the 1973 ISO Form CGL policy.                     Rather, Weedo more

narrowly held that the "business risk" exclusions – designed to

allocate risk to the insured for certain damages caused by its

poor performance – were not ambiguous even when read together

with another exclusion in the policy that could be interpreted

to   expand    coverage     to     those   same    occurrences     that    had   been

excluded.      Id. at 245-48.

      The     Court     observed    that   the     "business     risk"    exclusions

themselves       were    clear     and   that     exclusionary     provisions     are

generally "meant to be read . . . independently of every other

exclusion."        Id. at 248.           The Court then reasoned that the

language    at    issue    could     not   be    combined   with    language     from

another exclusion to create an "artificial ambiguity" that would

lead to an exclusionary provision granting additional coverage

beyond what a reasonable insured could have expected, rather

than subtracting from it.            Id. at 245-48.         Hence, the "business

risk"   exclusions       barred     coverage     for   repairing    the   insured's

                                           16                               A-5589-13T3
faulty work.    Ibid.

    Significantly here, the 1973 ISO version of the CGL policy

involved in Weedo differs from the 2007 ISO Form used for the

CGL policy National Union issued to Phibro and the 2009 ISO Form

used for the Umbrella policy.                 The 1973 ISO Form defined the

term "occurrence," in relevant part, as "an accident . . . which

results in . . . property damage neither expected nor intended

from the standpoint of the insured."

    By contrast, the 2007 and 2009 ISO Forms that are at issue

here instead define an occurrence, in part, as "an accident,

including continuous or repeated exposure to substantially the

same general harmful conditions."6               Hence, Weedo's construction

of the 1973 ISO Form does not control this case, which involves

newer ISO forms containing different definitional language.

    After Weedo, in Aetna Casualty & Surety Co. v. Ply Gem

Industries,    Inc.,    343    N.J.   Super.      430,   444-50   (App.    Div.),

certif. denied, 170 N.J. 390 (2001) ("Ply Gem"), we addressed

whether   claims   for        economic    losses     could   qualify       as     an

6
  Although neither use the "expected or intended" language within
any of its definitions, both the 2007 and 2009 ISO Forms do
contain separate exclusions for bodily injury and property
damage "expected or intended from the standpoint of the
insured."   This does not alter our conclusion that the Court's
interpretation of the 1973 ISO Form in Weedo does not apply to
the general insuring clauses of the 2007 and 2009 forms at issue
here.   Moreover, as we discussed supra, we do not find that
Phibro expected or intended the adverse side effects of Aviax.

                                         17                               A-5589-13T3
"occurrence" covered by a CGL policy.                      The insurer in Ply Gem

contended there was no coverage under a CGL policy for claims

against       an   insured    manufacturer         of    defective     fire   retardant

plywood ("FRTP").         Id. at 433.          The insurer argued that, because

the trial court had dismissed "strict liability and negligence

claims against [the insured] on the grounds that these were

economic losses recoverable under [the Uniform Commercial Code]

and breach of contract theories," those claims therefore were

not covered "occurrences" under the policy.                     Id. at 444.

    The       trial    court     and    this      court    rejected    the     insurer's

arguments in Ply Gem.            We observed that, in an insurance context

as opposed to the context of a harmed plaintiff's own lawsuit,

"the issue was not whether the FRTP plaintiffs could recover in

tort,    or     whether   they       were    relegated     to   [contract]      remedies

available under the UCC."               Id. at 445.        We noted in Ply Gem the

pivotal question was whether, "regardless of the nature of the

cause of action against [the insured], the damages [the FRTP]

plaintiffs         suffered    and     for   which      [the    insured]     was    deemed

liable    fell      within    the     coverage      offered      by   [the    insurer's]

policies."         Ibid. (emphasis added).              We further noted in Ply Gem

the Supreme Court in Weedo "made it clear that the theory upon

which     the      plaintiff     proceeded         [against      the    insured]         was

irrelevant to a determination of whether there was a covered

                                             18                                    A-5589-13T3
'occurrence' under the CGL."            Id. at 447.

       We held in Ply Gem that the insurer had a duty to defend

the claims against the insured for damages to property other

than the FRTP itself.             Id. at 450.   Likewise here, as we discuss

in more depth, infra, the damage caused by Aviax was not to

Phibro's       product      itself.     Instead     the     damage       was   to    the

customers' chickens that ingested the food additive.

       This    more    limited     interpretation     of    Weedo    is    consistent

with our recent opinion in Cypress Point Condominium Assoc.,

Inc. v. Adria Toners, LLC, 441 N.J. Super. 369 (App. Div.),

certif. granted, 223 N.J. 355 (2015).7                    In Cypress Point, the

issue    was    whether       a   developer's   CGL     policy      covered     claims

brought by a condominium association for consequential damages

resulting      from     the    defective    work   of      subcontractors.           The

subcontractors failed to properly install the roof, flashing,

gutters, brick façade, windows, doors, and sealants.                            Id. at

373.     The plaintiff condominium association did not argue the

replacement costs of these particular items were covered by the

policy.       Id. at 374.         Instead, the association sought recovery

for     damages       the     faulty   workmanship      caused      to     sheetrock,

insulation, floors, wall finishes, and other such portions of

7
  The Supreme Court recently heard oral argument                          in   Cypress
Point. No opinion has been issued as of this date.

                                           19                                  A-5589-13T3
the individual units as well as in the common areas.                           Ibid.      The

question   before      us        was   whether        these    consequential         damages

constituted     "property         damage"       and     an    "occurrence"      under     the

policy.

      We   concluded         in    Cypress         Point     that    the    consequential

damages were "property damage" because they "clearly constitute

'physical injury to tangible property.'"                       Id. at 377.          Further,

the   damages        resulted          from     an      "occurrence"         because      the

subcontractors        did    not       expect      or      intend    for    their    faulty

workmanship to cause property damage and because the damages

"amount[ed]     to    an     unexpected         and     unintended         'continuous     or

repeated   exposure         to    substantially          the    same   general      harmful

conditions.'"        Ibid.

      We distinguished Weedo in Cypress Point, noting the Supreme

Court did not consider in Weedo whether faulty work performed by

the insured defendant contractor was "property damage" or an

"occurrence," because the insurer had conceded that "but for the

exclusions    in     the     policy,      coverage         would    obtain."         Cypress

Point, supra, 441 N.J. Super. at 377-78.                           Further, the damages

at issue in Weedo were the cost of replacing the defective work

itself, not the cost of repairing or replacing other property

damaged by the defective work, that is consequential damages.

                                              20                                    A-5589-13T3
Id. at 378.8

       The Cypress Point panel concluded that the damages to the

common areas and individual units fell within the definitions of

property damage and occurrence.                 Id. at 377.      The point we made

in Cypress Point, which we reiterate here, is that the business

risk     doctrine       relates    only    to     the    exclusions     to   coverage

contained    in     a   CGL   policy      and   should     not   be   read   into   the

general insuring clauses of those policies.                      Thus, we conclude

that the damage to the chickens is an occurrence covered by the

policies.

                                           3.

       The next disputed question under the insuring clauses is

whether     the     diminished      size        and     weight   of    the   chickens

represents a form of covered "property damage."                         The policies

define     property       damage    as     "[p]hysical       injury     to   tangible

property, including all resulting loss of use of that property"

or, alternatively, "[l]oss of use of tangible property that is

not physically injured."

8
  In Cypress Point, we also distinguished another case on which
National Union relies, Firemen's Insurance Co. of Newark v.
National Union Fire Insurance Co., 387 N.J. Super. 434 (App.
Div. 2006). We held in Firemen's there was no covered "property
damage" because the damages claimed in that case were to replace
defective work, i.e., sub-standard firewalls, and did not
involve consequential damages.   Cypress Point, supra, 441 N.J.
Super. at 378.

                                           21                                 A-5589-13T3
    Phibro argues that Aviax caused "physical injury" to its

customers' property by stunting the growth of the chickens and

causing them to produce less meat.                   Phibro contends the fact

that the undersized chickens could still be sold does not mean

that no physical injury to them was sustained.                       Although the

chickens would grow after Aviax was removed from their feed,

Phibro    maintains    that    the    damages       from   stunted   growth    were

"locked-in"   because     of    production         constraints   and    deadlines.

Stunted    growth     caused   a     loss     of   meat    production    and   lost

profits, which Phibro maintains also constitute a "loss of use

of tangible property."         Phibro also contends that it reasonably

expected that third-party property damage of its customers would

be covered by the policies.

    National Union argues in opposition that stunted growth is

not a "physical injury."             It points out that once Aviax was

removed from the chickens' diets, their appetites returned, and

they grew and gained weight.            National Union also stresses that

the affected chickens were sold for human consumption.

    Although National Union agrees that "[i]t is beyond dispute

that the chickens grew at a slower rate while consuming chicken

feed that included . . . Aviax," National Union contends that

"'stunted   growth'     and    'weight      suppression'      without   permanent

injury to the chickens does not constitute 'physical injury'

                                         22                               A-5589-13T3
where there is no evidence of a physiological change."                          Relying

on an unpublished Minnesota case, National Union argues that

there can be no physical injury without physiological damage and

necropsies performed by Phibro on the affected chickens failed

to show any physiological harm.                   National Union further argues

that there was "no complete loss of use of the chickens," and

"'lower meat production' is not a 'loss of use.'"

    We agree with Phibro that the situation here qualifies as

property damage within the meaning of the policies' insuring

clauses.    Several reasons support that conclusion.

    With respect to the "physical injury" prong of the property

damage   definition,      in    a   decision        interpreting      the     analogous

phrase "direct physical loss" under a Warehouseman's Liability

policy, we adopted a broad notion of the term "physical."                             We

noted    that   "[s]ince    'physical'           can    mean   more   than     material

alteration or damage, it was incumbent on the insurer to clearly

and specifically rule out coverage in the circumstances where it

was not to be provided."             Customized Distrib. Servs. v. Zurich

Ins. Co., 373 N.J. Super. 480, 491 (2004), certif. denied, 183
N.J. 214 (2005).     We recognized that "any ambiguity on the point

should be resolved in favor of coverage."                   Ibid.

    Several      courts    in       other        jurisdictions      have    found    the

appropriate     meaning    of   the    phrase          "physical    injury"    in   this

                                            23                                 A-5589-13T3
context is "an alteration in appearance, shape, color or in

other      material     dimension."          Nat'l       Union     Fire       Ins.      Co.    of

Pittsburgh, Pa. v. Terra Indus., Inc., 216 F. Supp. 2d 899, 917

(N.D. Iowa 2002) (emphasis added), aff’d, 346 F.3d 1160 (8th

Cir. 2003), cert. denied, 541 U.S. 939, 124 S. Ct. 1697, 158 L.

Ed.   2d    360   (2004);       see   also   Fid.        &    Deposit    Co.       of   Md.    v.

Hartford Cas. Ins. Co., 215 F. Supp. 2d 1171, 1183 (D. Kan.

2002); F&H Constr. v. ITT Hartford Ins. Co. of Midwest, 12 Cal.

Rptr. 3d 896, 905 (Ct. App. 2004); Capstone Bldg. Corp. v. Am.

Motorists Co., 67 A.3d 961, 982 (Conn. 2013); Traveler's Ins.

Co. v. Eljer Mfg., Inc., 757 N.E.2d 481, 496 (Ill. 2001); Summit

Custom Homes, Inc. v. Great Am. Lloyds Ins. Co., 202 S.W.3d 823,

828     (Tex.     Ct.    App.     2006).          Although        the     notion         of     an

"alteration"       is    not    synonymous        with       "injury,"       the   courts       in

these cases were plainly referring to detrimental alterations.

Physical injury has also been defined as "damage or harm to the

physical condition of a thing."                    Farm Bureau Mut. Ins. Co. of

Am. v. Earthsoils, Inc., 812 N.W.2d 873, 876 (Minn. Ct. App.),

review denied, No. A11-0693 (Minn. 2012) ("Earthsoils").

      Guided by these various authorities that shed light on the

plain meaning of the policy term "physical injury," we conclude

the     chickens'        stunted      growth        here        qualifies          as      such.

Undoubtedly,       the     undisputed        smaller          sizes     of     the      broiler

                                             24                                         A-5589-13T3
chickens could be considered an alteration of "other material

dimension," even if stunted growth is not within the meaning of

the   terms    "appearance"        or    "shape."        Simply    stated,        stunted

growth      represents      harm    to    the    physical        condition        of     the

chickens.

      There is no support in the language of the policies for

National      Union's    assertion       that   there     must    be    physiological

damage to meet the physical injury requirement.9                    Moreover, it is

not   self-evident       that      stunted      growth     is     not       a    form     of

physiological damage.         The term "physiological" has been defined

to be "characteristic of or appropriate to an organism's healthy

or normal functioning."            Merriam-Webster's Collegiate Dictionary

935   (11th    ed.   2014).        Stunted      growth    surely       is   not       normal

functioning.

      The     fact   that    the    chickens      here    were     sold         for    human

consumption is not dispositive of whether there was property

damage.      The term "physical injury" under the policies does not

require that the property that is damaged be unsalable.                           Neither

the trial court nor National Union have cited any authority that

supports the argument that the chickens could not be physically

9
   National Union has cited one unpublished case holding
physiological damage is required to meet the "physical injury
requirement."   Pursuant to Rule 1:36-3, we decline to discuss
the unpublished case, which does not persuade us in any event.

                                           25                                     A-5589-13T3
injured if they were sold for human consumption, irrespective of

their size and weight.

     We are cognizant that the chickens might have recovered

their lost weight if given sufficient time after removing Aviax

from their diet.        But that possibility does not establish that

there   was    no   property   damage.    The   point   is   refuted     by   an

affidavit10 from Dr. Hector Cervantes, Senior Manager for Poultry

Technical Services at Phibro.        Dr. Cervantes explained that:

                   The   lifecycle   for  the   Customers'
              Broiler Chickens is generally forty-two (42)
              days from the day of chick placement at the
              farm to slaughter. . . .

                   Uniformity  of   size   is  critically
              important to the Customers, in part because
              it represents the quality of their bird
              product and because automated processing
              plant equipment cannot be properly adjusted
              when variations in size exceed the "normal"
              range.

In addition, Dr. Cervantes addressed the commercial significance

of such delayed growth:

                   Allowing the birds to grow longer than
              their normal slaughter date would not have
              solved the problem because as they grow
              older, their mortality rate rises and the
              lack of uniformity in size would have
              persisted.      Moreover,  modern   poultry

10
   Although the affidavit is presented within a confidential
appendix, we are free to discuss it because counsel at oral
argument on appeal advised that they are only interested in
preserving the confidentiality of the Customers' identities and
the amounts of their respective claims and settlements.

                                     26                                A-5589-13T3
          operations such as those conducted by the
          Customers are highly mechanized, and highly
          scheduled, operations that depend on uniform
          and consistent processing of birds from
          hatching to the pre-determined slaughter
          age, with distinct groups of birds moving
          through the system one right after the other
          using the available facilities and feed and
          other resources dedicated to each stage of
          growth.   In addition to the increased time
          and cost of taking longer to feed the birds
          until they reach the targeted slaughter
          weight, there would not have been space
          available to house those birds as the
          younger birds work their way through the
          system.   Thus, once the scheduled slaughter
          date arrived for the Customers' chickens
          affected by Aviax, the Customers' losses
          were locked-in.

     Because the facts are to be viewed on summary judgment in

the light most favorable to Phibro, see Rule 4:46-2, we must

accept for purposes of National Union's dispositive motion that

it was commercially infeasible to delay the slaughter of the

chickens that consumed Aviax.    Thus, even though the chickens

might have recovered given enough time, accepting as true the

facts as alleged by Phibro, the damage occurred at the pre-

determined slaughter date if it were economically infeasible to

delay slaughter.11

11
  We discuss, infra, at Point III(A)(3) whether coverage for the
property damage is nullified under the "impaired property"
exclusion if National Union persuades a fact-finder that the
chickens feasibly could be "restored to use."

                                27                       A-5589-13T3
    In sum, the stunted growth of the chickens qualified as a

"physical      injury,"       subject    to   the     caveat      of   potential

restoration we discuss later in this opinion.

                                        4.

    Although we have found "physical injury" exists here, for

sake of completeness, we address the second alternate prong of

the "property damage" definition, that is, whether there was a

"[l]oss   of    use     of   tangible   property     that   is   not   physically

injured."       Citing Heldor Industries, Inc. v. Atlantic Mutual

Insurance Co., 229 N.J. Super. 290, 397-98 (App. Div. 1988),

National Union argues that "a claim for property value loss and

lost business profits only qualifies as 'property damage' if

there is underlying physical property damage to a third party."

However, in Heldor, we were not addressing the "loss of use"

provision in the definition of property damage, but instead were

considering whether alleged diminished property values resulting

from faulty pool construction constituted property damage to a

third party that would not be subject to the "business risk"

exclusions.         Ibid.

    National Union also relies on Great American Insurance Co.

v. Lerman Motors, Inc., 200 N.J. Super. 319 (App. Div. 1984),

but that decision does not control the present case.                    In Great

American,      we    considered   whether,    once    "property    damage"     was

                                        28                               A-5589-13T3
established by physical injury to tangible property, the insurer

was   obligated       to     cover     consequential       damages    such   as     lost

profits in addition to claims for damages to tangible property.

Id. at 323-24.           Although we found "[t]he obligation to pay all

damages     for    the     loss   of   use    of   property    resulting     from    its

injury      or   destruction      is    inclusive     of   consequential     damages,

including loss of profits or business, flowing from the loss[,]"

id. at 326, we were addressing the "loss of use" provision in

the "property damage" definition because the case involved a

claim for consequential losses flowing from fire damage to the

premises of a car dealership.                      Id. at 322-23.       Because the

dealership        property    had      been   obviously     damaged,    we   did     not

address in Great American whether the claim could qualify as

"loss of use of tangible property which has not been physically

injured or destroyed."            Id. at 323.

      Notably, in considering the Heldor decision in the context

of the "loss of use" prong of the property damage definition,

the federal district court in New Jersey has observed that if

Heldor's restriction of coverage for consequential damages to

those flowing from physical damage to tangible property "applied

to    all    cases       involving      property      damage    and    consequential

damages, it would render the loss of use provision meaningless."

Elizabethtown Water Co. v. Hartford Cas. Ins. Co., 998 F. Supp.
29                              A-5589-13T3
447, 454 (D.N.J. 1998).         In Elizabethtown Water Co., the insured

water   company     failed    to   adequately    supply       water    to     a   new

development.      Id. at 449-50.        There was no physical injury to

the property but the court recognized that the "developers could

not use their property for its intended use because no person

would purchase a lot or house that did not have an adequate

water supply."      Id. at 454.        Finding that "Heldor's limitation

does not . . . comport with the second prong of the definition

of property damage," the district court held that real estate

developers suffered a coverable "loss of use" of their property

subject to an exclusion not relevant here.              Ibid.

    National Union also relies on Earthsoils, supra, 812 N.W.2d

at 873.     However, the court in that Minnesota case was not

addressing the "loss of use" definition of property damage, id.

at 876 n.2, but rather was considering whether the failure to

achieve    an    anticipated    crop   yield    was    "physical       injury      to

tangible property."          Id. at 876-78.     The court found that the

"failure    to    achieve     anticipated   crop      yield     is    not    itself

physical injury to tangible property" noting that "a crop that

never existed is not tangible property."              Id. at 878.

    National Union argues that, like the unrealized crop yield

in Earthsoils, "[c]hicken meat/weight that never existed in the

first instance cannot be considered to be tangible property."

                                       30                                   A-5589-13T3
However, the chickens themselves surely did exist.                         Assuming it

was   commercially     infeasible         to    delay    the   slaughter         of   the

chickens, then Phibro's customers were unable to realize the

chickens' full potential for sale, because of the adverse side

effects of Aviax.       This shortfall qualifies, at the very least,

as a partial "loss of use" of the chickens, even if we were to

accept the premise that they were not physically injured.

      In sum, the stunted growth caused by the chickens ingesting

Aviax   qualifies     under   National         Union's    policies        as   "property

damage"     because     the     chickens          were     physically          injured.

Alternatively, even if we were to consider the chickens not

physically injured, their stunted growth nonetheless resulted in

a partial loss of their use, which independently qualifies as

"property damage."

                                      III.

      Having   concluded      that   Phibro's      claims      for    coverage        fall

within the insuring provisions of the policies, we now consider

whether any of the policy exclusions invoked by National Union

negate coverage.

      The   burden    of   proof     is    on     an     insurer     to    prove      that

exclusions apply.       Generally, "insurance policy exclusions must

be narrowly construed; the burden is on the insurer to bring the

case within the exclusion."           Flomerfelt v. Cardiello, 202 N.J.
31                                    A-5589-13T3
432, 442 (2010) (quoting Am. Motorists Ins. Co. v. L-C-A Sales

Co., 155 N.J. 29, 41 (1998)); see also Aviation Charters v.

Avemco   Ins.   Co.,    335    N.J.    Super.       591,   594   (App.    Div.   2000)

("Where an exclusionary clause is involved, such clauses are

narrowly   construed;         indeed    it     is    the    insurer's     burden     to

establish the exclusion."), aff'd, 170 N.J. 76 (2001).

                                         A.

    We     first       address     the       impaired        property     exclusion.

"Impaired property" is defined as

           tangible property, other than "your product"
           or "your work", that cannot be used or is
           less useful because:

           a. It incorporates "your product" or "your
           work" that is known or thought to be
           defective,    deficient,   inadequate   or
           dangerous; or

           b. You have failed to fulfill the terms of a
           contract or agreement;

           if such property can be restored to use                       by
           the   repair,  replacement,   adjustment                      or
           removal of "your product" or "your work"                      or
           your fulfilling the terms of the contract                     or
           agreement.

           [(Emphasis added).]

    The    policy      language       states    that       coverage   for     property

damage liability does not apply to

           "[p]roperty damage" to "impaired property"
           or property that has not been physically
           injured, arising out of:

                                         32                                   A-5589-13T3
           (1) A defect, deficiency, inadequacy                       or
           dangerous condition in "your product"                      or
           "your work"; or

           (2) A delay or failure by you or anyone
           acting on your behalf to perform a contract
           or agreement in accordance with its terms.

           This exclusion does not apply to the loss of
           use of other property arising out of sudden
           and accidental physical injury to "your
           product" or "your work" after it has been
           put to its intended use.

           [(Emphasis added).]

    National Union argues that this exclusion applies because

the customers' chickens were damaged by a defect in Phibro's

product (and were thus "impaired"), but could be "restored to

use" by removing Aviax from their diets.

    Phibro     counters       that     this     exclusion    does     not    pertain

because (1) it does not apply to chickens that were physically

injured, (2) the clause applies only to claims for damages to

the insured's own product or work and not to damages to third

parties,     and    (3)     the     affected    chickens     do    not     meet    the

definition     of    impaired         property     because        Aviax     was    not

"incorporated"       into     the     chickens,     there    was     no     "defect,

deficiency, or dangerous condition in Aviax," and the chickens

could not be "restored to use."                We consider these arguments in

turn.

                                         33                                  A-5589-13T3
                                          1.

      In Newark Insurance Co. v. Acupac Packaging, Inc., 328 N.J.

Super. 385, 391-92 (App. Div. 2000), we addressed whether the

impaired property exclusion barred coverage under a CGL policy.

Like the policies at issue here, the policy in Acupac defined

"property damage" as "[p]hysical injury to tangible property" or

"[l]oss   of    use    of   tangible      property      that   is   not   physically

injured."       Id. at 391.         The property in question in Acupac

consisted of defective foil packages provided by the insured to

customers      who    attached     them    to     advertisement       cards    to    be

inserted into magazines.            The packages leaked skin cream into

the advertisement cards, causing them to be withdrawn from use.

Id. at 388-90.

      We noted in Acupac that the impaired property exclusion

would bar coverage under the "loss of use" provision in the

insured's policy "since the damage would be to property not

physically     injured      or   impaired       arising    out   of   a   defect     or

deficiency in [the insured's] work."                      Id. at 393.         We then

considered whether the cards that had not yet been inserted into

the   magazines,      and   thus   had     not    yet   been     subjected    to    the

leaking lotion, were physically injured.                    Id. at 399-400.          In

that regard, we determined that there were factual issues that

needed to be resolved on remand.                 Id. at 400.        We held that if

                                          34                                  A-5589-13T3
the   fact-finder      concluded        that       the     cards    were     damaged,     the

exclusion would not apply unless the fact-finder determined that

the cards were only "impaired."                     Ibid.        We recognized that if

the cards could not be restored to use, "they were effectively

damaged and not merely 'impaired' within the meaning of [the

impaired property] exclusion."                   Id. at 400-01.

      Like   the    policy      in    Acupac,       the     definition       of   "impaired

property" in Phibro's CGL policy does not exclude all property

that has been physically damaged.                   The definition only specifies

property that cannot be used, or is less useful and can be

restored to use.           The definition of "property damage" itself

includes "[p]hysical injury to tangible property, including all

resulting loss of use of that property," (emphasis added), which

implicitly    recognizes        that    there        can    be     "loss    of    use"   when

property is physically injured.                   Accordingly, we reject Phibro's

argument     that    the   "impaired         property"       exclusion        cannot     ever

apply when there is proof of physical injury.                                As we shall

discuss,      infra,       in        Part         III(A)(3),         this        exclusion's

applicability       here   instead      turns       on     the     factual    question     of

whether    that     physical     harm       to    the    property     can     feasibly      be

restored.

                                             35                                     A-5589-13T3
                                                2.

       We are likewise unpersuaded by Phibro's argument that the

"impaired property" exclusion cannot apply where there is damage

to third-party property.                The definition of "impaired property"

itself, which is "tangible property, other than 'your product'

or    'your     work,'"        defeats    that       argument.        Only    third-party

property qualifies as "impaired property" under that definition.

Therefore,         even   if    the    ingested       Aviax   supplement,       i.e.,    the

insured's product, has been dissipated, the resulting harm to

the chickens owned by Phibro's customers qualifies as damage

that    has     impaired       third-party       property.          The     question    then

becomes whether the nature and permanency of that impairment

falls within the terms of this policy exclusion.

       Phibro admits that Aviax caused unintended physical injury

to its customers' chickens, yet asks us to find that Aviax was

not    "defective,        deficient,       inadequate         or    dangerous"    because

Aviax     was      effective      in     preventing         coccidiosis.        The     term

"defective" has been defined as "imperfect in form or function"

and "deficient" has been defined as "lacking in some necessary

quality       or    element"      or     "not    up    to     a    normal    standard    or

complement."         Merriam-Webster's Collegiate Dictionary 326 (11th

ed.    2014).        We   conclude       that    Aviax      was    indeed    defective    or

deficient, as it clearly was imperfect in function and "not up

                                                36                                A-5589-13T3
to a normal standard."

       As to the question of whether Aviax was "incorporated" into

the chickens, neither party cites to us any case law regarding

when   "your    product"          or   "your    work"      can       be    considered           under

coverage law to be incorporated into a third party's product.

The plain meaning of the term "incorporate" is "to unite or work

into      something         already        existing            so     as         to     form         an

indistinguishable whole" or "to blend or combine thoroughly."

Merriam    Webster's        Collegiate         Dictionary           631    (11th       ed.    2014).

Certainly,     the      chickens       were    already         existing.              Aviax,      when

ingested, became combined with and indistinguishable from the

chickens.         We    agree      with    National        Union          that    the       affected

chickens "incorporated" the defective Aviax.

                                               3.

       Nonetheless,         the      affected       chickens         would        be    "impaired

property"    if    they      could      "be    restored        to    use     by       the    repair,

replacement, adjustment or removal" of the Aviax.                                 Phibro argues

that   because         of   the      chickens'      pre-determined               lifecycle         and

slaughter      dates,        they      could        not    be        "restored          to      use."

Conversely,       National         Union       contends        the        impaired          property

exclusion      "contains        no     time    limitation[,]"              and    that       if    the

chickens    had    been      given      more    time      to    grow,       they       would      have

reached their expected weight.

                                               37                                            A-5589-13T3
       To support its premise that the chickens would have reached

their expected weight if given more time, National Union argues

that the MJC reports and Phibro's notice of claim indicate this.

We have found nothing, however, in the MJC reports that supports

National Union's contention.         Further, Phibro's notice of claim

stated that chickens that consumed Aviax "appear to have (1)

consumed   substantially     less   feed    than          chickens     not   consuming

Aviax, (2) had substantially lower feed conversion rates than

chickens    not     consuming     Aviax     .        .     .    and    (3)    consumed

substantially lower quantities of drinking water than chickens

not consuming Aviax."

           The result is that it has taken far longer
           to raise the chickens to slaughter size,
           with   associated   increased   cost  to the
           producer, and when ultimately slaughtered,
           because of the irregular growth of the
           chickens,   the   cost   of   processing the
           chickens has been increased. When Aviax has
           been removed from the feed rations, these
           impacts have reportedly been reversed.

       These statements     in the claim notice on their face are

insufficient to establish conclusively that the chickens would

have grown to their expected weight, if given more time.                              In

fact, Dr. Cervantes stated in his affidavit that "[a]llowing the

birds to grow longer than their normal slaughter date would not

have   solved     the   problem   because       as       they   grow   older,    their

mortality rate rises and the lack of uniformity in size would

                                     38                                       A-5589-13T3
have persisted."

    Viewing the record, as we must, in the light most favorable

to Phibro, there is a genuine question of fact as to whether

removing the Aviax and allowing more time before slaughtering

the chickens would have restored the chickens to use.                          Hence,

summary judgment should not have been granted to National Union

on the basis of the "impaired property" exclusion.

    There also remains an open issue as to whether the phrase

"restored to use" within the definition of impaired property

means, on the one hand, restored to use, no matter what the

cost,    or,    alternatively,        conveys    a    qualified      concept     that

considers commercial or economic feasibility.

    Phibro argues that it was commercially infeasible to delay

the slaughter of the chickens and they could not be restored by

the pre-determined slaughter date.                   National Union conversely

argues that the relevant inquiry is only "whether [the chickens]

could    have    been    restored,"         without     considering     the      pre-

determined slaughter date.

    We    conclude      the    most     sensible      reading   of    the      phrase

"restored to use" within the impaired property exclusion takes

into account the cost and commercial feasibility of restoration.

We decline to construe the phrase more expansively to encompass

situations      in   which    it   would    be   exorbitant     or    commercially

                                           39                               A-5589-13T3
unrealistic to attempt to return the damaged items to their

former or normal condition.                In this respect, we agree with an

Indiana       district     court      case       involving         a     similar       policy

provision, finding it illogical to assume that parties to an

insurance contract would intend such an exclusion to apply no

matter what the cost of restoration might be.                           Am. Ins. Co. v.

Crown Packaging, 813 F. Supp. 2d 1027, 1050 (N.D. Ind. 2011).

       Here, in this factual setting, the more reasonable approach

to assess whether the chickens could be restored to use is to

evaluate whether the cost of delaying their slaughter until they

achieved the expected weight was less than the damages incurred

by adhering to the scheduled slaughter date.                             That assessment

would presume, of course, that the chickens could ultimately

achieve their normal expected weight.                      The pertinent facts on

this    subject   along      with    the    costs    of    delay        and    the    damages

incurred      would   need    to    be     developed      at   a       trial    or    plenary

hearing.

       We therefore conclude that the impaired property exclusion

might    apply    here,      but    only    if    the    chickens        reasonably         and

feasibly      could   be   restored        to    their    normal        size    and    weight

within    a    commercially-viable          time    frame      and      at     commercially

reasonable      cost.      Because       that    assessment        turns       on    material

disputed facts, summary judgment on this issue was unwarranted.

                                            40                                        A-5589-13T3
The restoration issue therefore must be remanded for factual

findings, after a trial or plenary hearing.

           [At   the  direction   of  the   court,  the
           published version of this opinion omits Part
           III(B)     and     (C)    concerning     the
           inapplicability of the contractual liability
           and professional liability exclusions, and
           Part IV concerning the settlement of the
           customers' claims without the insurer's
           consent. R. 1:36-2(a).]

                                     V.

       The remaining arguments respectively raised by the parties

lack    sufficient     merit   to   warrant    discussion.      R.      2:11-

3(e)(1)(E).

       Affirmed   in   part,   reversed   in   part,   and   remanded      for

further proceedings consistent with this opinion.              We do not

retain jurisdiction.

                                     41                              A-5589-13T3