The US Appeal Court in Iowa held that manufactured plastic bags that deteriorated in sunlight because of the absence of an ultraviolet inhibitor and caused small shreds of plastic to commingle with a customer’s landscaping materials requiring clean-up was an accident and therefore an occurrence under their comprehensive general liability policy.
The policy provided coverage for an ‘occurrence’ resulting in ‘property damage’. An occurrence was ‘an accident, including continuous or repeated exposure to substantially the same general harmful conditions’.
Under Iowa law (like South Africa) an accident is an undesigned, sudden and unexpected event usually of a harmful or unfortunate character. This implies a misfortune with resulting damage to a victim. The accident is not their negligence which results in the misfortune.
The deterioration of the defective bags causing damage to other property was an indemnified occurrence. The property damage (if any) was to the customer’s property other than the bags themselves. ‘Occurrence’ must be construed to cover damages to property that was not the insured’s work-product (the bags). If there was damage to property the insurers must indemnify the loss.
The court left open the question whether there was ‘property damage’ and referred that issue back to the lower court.