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United States District Court finds that failure to ship goods did not fall within insurance policy’s coverage for “property damage”
M Consulting & Export, LLC v. Travelers Cas. Ins. Co. of Am.
In M Consulting and Export, LLC v. Travelers Casualty Insurance Company of America, the United States District Court for the District of Maryland entered summary judgment in favor of a defendant insurer, which had declined to pay a default judgment award that its named insured was legally obligated to pay to a plaintiff import/export company. Writing for the Court, Judge Richard D. Bennett held that a missing shipment of sparkling wine did not fall within the terms of the commercial general liability insurance policy’s coverage for “property damage” arising from an “occurrence.” Furthermore, even if the loss did constitute insured “property damage,” coverage was explicitly excluded in this case under the terms of the insurer’s policy. Accordingly, the Court entered judgment in favor of the insurer.
M Consulting and Export LLC (“Plaintiff”) contracted with Wine & Spirits Expo, LLC, d/b/a Cork N Bottle (“Cork N Bottle”) to provide five hundred (500) cases of sparkling wine for shipment to West Africa. Only three hundred (300) cases arrived. Plaintiff filed suit against Cork N Bottle in the Circuit Court of Maryland for Baltimore City, alleging claims sounding in negligence and breach of contract (the “underlying lawsuit”). Plaintiff obtained a default judgment in the underlying lawsuit. Thereafter, Plaintiff sent a demand letter for the full amount of the judgment to Travelers Casualty Insurance Company of America (“Defendant”), which had issued Cork N Bottle a commercial general liability insurance policy (the “Travelers Policy”) during the time the shipment was made. Plaintiff’s letter elucidated their theory in the underlying lawsuit; namely, that Plaintiff had failed to ship the additional two hundred (200) cases of wine. Defendant declined to pay the judgment in the underlying lawsuit, taking the position that the loss (1) was not covered under the terms of the Travelers Policy, and (2) specifically excluded. Plaintiff thereafter brought an action in the United States District Court for the District of Maryland to recover the judgment in the underlying lawsuit. Defendant filed a Motion for Summary Judgment.
The Court granted Defendant’s Motion for Summary Judgment. Accepting that Maryland law controlled the interpretation of the Travelers Policy, the Court held that Plaintiff’s loss was not covered under the terms of the policy. The Court noted that the Travelers Policy covered only those sums that Cork N Bottle became legally obligated to pay as a result of “property damage” caused by an “occurrence ;” the policy defined “property damage” as either “physical injury to tangible property” or “loss of use of tangible property.” The Court reasoned that, under persuasive authority, Cork N Bottle’s failure to ship the two hundred (200) cases did not constitute either “physical injury to tangible property” or “loss of use. The loss of bargained for merchandise neither qualified as a “physical injury to tangible property,” nor did the loss of property constitute “loss of use.” Furthermore, Cork N Bottle’s failure to ensure delivery of all the wine Plaintiff had ordered did not constitute an “occurrence” because Plaintiff was a mere “disappointed purchaser;” the loss was, therefore foreseeable, rather than accidental. Only accidental loss could constitute an “occurrence” under the Travelers Policy. Therefore, Plaintiff’s loss was not covered under the Travelers Policy.
Even if the Plaintiff’s loss had constituted “property damage” caused by an “occurrence,” however, the Court held that the Travelers Policy’s exclusions would have precluded coverage in this case. The Court noted that the Travelers Policy excluded coverage for “damage to property that “ha[d] not been physically injured, arising out of . . . [a] delay or failure by [Cork N Bottle] or anyone acting on [its] behalf to perform a contract or agreement in accordance with its terms.” The Court held that this exclusion was directed at an injury arising from the deficient performance of a contract. Even though the underlying lawsuit sounded in negligence, the loss for which Plaintiff sought to recover was the result of Cork N Bottle’s failure to perform its obligations under contract. Therefore, even if the alleged loss constituted “property damage,” coverage under the Travelers Policy was excluded.
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