Indalex: The Pennsylvania Superior Court Rejects Insurers' Attempts To Deny Coverage for Negligence Actions Involving 'Faulty Workmanship'

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On December 3, 2013, the Pennsylvania Superior Court issued its opinion in Indalex Inc. v. National Union Fire Insurance Co. of Pittsburgh PA, holding that insurance coverage is available to product manufacturers for negligence claims asserting damages to third parties. The court made clear that the Pennsylvania Supreme Court’s coverage-limiting holding in Kvaerner is confined to cases where the underlying claims are for breach of contract and breach of warranty, and the only damages are to the insured’s work product. The court further specifically rejected application of the gist of the action doctrine to the duty-to-defend analysis, affirming long-standing Pennsylvania law that, if even one tort claim is potentially covered, the insurance carrier’s duty to defend is triggered.

The Indalex opinion is a much-needed clarification of Pennsylvania law on the scope of insurance coverage for actions involving faulty workmanship. It corrects a disturbing trend in both the market and some judicial opinions that improperly limited insurance coverage if there was any allegation of faulty workmanship within the underlying complaint. That rule, as implicitly recognized by the Pennsylvania Superior Court in Indalex, is inconsistent with Pennsylvania insurance principles, the purpose of comprehensive general liability policies, and the reasonable expectations of the policyholders purchasing that coverage.

We have litigated this issue successfully for our clients and have helped negotiate endorsements to best protect them in this coverage area.