Insurance Law

In Bombar, one of the Upright's (the insured?s) employees, Ms. Bombar, was injured when she was struck by a forklift while working at and for Upright. Though the forklift had a backup alarm that was installed by Upright, it had not been completely or properly installed and was not operational.

Ms. Bombar sued Upright, Upright submitted the claim to its insurer, West American, which denied coverage, and Bombar obtained a $2.4 million verdict against Upright. Importantly, Ms. Bombar's claim was based, at least in part, on Upright's negligent failure to warn, inspect, and install with regard to the forklift?s back-up alarm. Upright assigned its claim against West American to Bombar and Bombar went after West American.

West American's denial was based upon its position that the claim fell within the "products-completed operations hazard" and that the policy excluded bodily injury claims to the extent that they fell within the ?products-completed operations hazard.?

Addressing this argument, the Superior Court, affirming the trial court and reaffirming and relying upon earlier Superior Court opinions, held that the claim was not a products-completed operation claim both because of the negligence allegations and because of the fact that the installation of the alarm was not properly or fully done and, a such, was not completed. Interestingly, the Court ultimately also afffirmed the trial court's decision concluding that there was no reasonable basis to deny coverage and granting summary judgment on a bad faith claim.

Why do this case and earlier cases such as
Harford Mutual Insurance Co. v. Moorhead, 578 A.2d 492 (Pa. Super. 1990) matter? Exclusions relating to products manufactured by the insured sometimes apply only to claims falling within the Products-Completed Operations Hazard. Further, in many older liability policies, this Products Hazard coverage is subject to an aggregate limit, while general liability coverage for "regular" negligence claims is not. Thus, if an underlying victim (or, in mass tort/latent disease cases, victims) alleges failure to warn in addition to strict liability claims, the door to coverage may not only be opened, but kicked off the hinges completely, resulting in coverage with no aggregate limits. Of course, some will argue that there is no guaranty that these decisions will be extended in such a manner, but insurers may not be willing to test the PA waters given the high stakes at issue.