A Closer Look at the CGL, Pt. VII; A Look at the Product Recall Exclusion (pt. 2)

My first post on the CGL’s “Recall of Product” exclusion discussed the exclusion’s triggering event or when it happens.  This post will explain what costs are excluded.

Here is the complete text of this part of the exclusion:

This insurance does not apply to damages claimed for any loss, cost, or expense incurred by you or others for the loss of use, withdrawal, recall, inspection, repair, replacement, adjustment, removal or disposal of your product, your work, or impaired property.

The verb “incur” -- which means, “become subject to as a result of one’s actions,”[1] -- is central to this exclusion.  The verb implies an event caused the claimant to perform a single or multiple actions.  As a result, the claimant now seeks reimbursement for a “deprivation as by negligence or accident,”[2]  “[a]n amount paid or incurred in payment,”[3] or, “[t]he cost … required for something incurred in the performance of a job or task.”[4]  The claimant can reduce all three nouns to a dollar amount.

The following events cause the damage.  In these examples, the insured’s work or product has cause some type of quantitative damage, which forces the “claimant” to seek indemnification from the insurer.

Withdrawal and recall are discussed in the first installment on this exclusion

“Loss of use:” “of” is a function word[5] that implies the word that follows is “the object or an action demonstrated or implied by the preceding noun.”  “Use” is the verbal of “use” which means to, “take hold or deploy as a means of achieving something.”[6]  “Loss of use” means the claimed is deprived of the ability to deploy an item towards a particular end.

“Inspection” is a verbal noun of the transitive verb “inspect,” which means, “to look at closely, typically to address quality.”  Here, the insured’s defective product or work has been incorporated into the claimant’s goods or work, forcing the claimant to look for the damage.

“Repair” is the verbal noun of “repair,” a transitive verb that means to, “restore to a good condition.”[7]  Here, the claimant has already fixed the problem and is looking for indemnification.

“Replacement” is a verbal noun of “replace,” which means, “provide a substitute for.”[8]  Here the claimant has swapped a new component for the insured’s defective part.

“Adjustment” is the verbal noun for “adjust,” which means to “alter slightly in order to achieve a desired result.”[9]  Here, the insured’s defective part or work as forced the claimant to change his equipment or operations.

“Removal” is the verbal noun of, “remove” which means, “take away from the position occupied.”[10]  Here, the claimant has simply shed the insured’s product or work.

“Disposal” is the verbal for “dispose,” which means, “get rid of.”[11] Here the claimant has thrown the defective good away.

Like most exclusions, the above drafting is broad and should apply to almost all potential situations.
 
  
 
 
 


[1] The Concise Oxford English Dictionary (“Oxford”), © 2004 p. 722

[2] The American Heritage Dictionary, Second College Edition (“American Heritage”), © 1985, p. 743 (the word “loss” is a noun derived from the verb “lose”)

[3] American Heritage, p. 320 (“cost”); see also Oxford at 323 (“legal expenses”)

[4] Oxford at 501(“expense”)

[5] https://www.merriam-webster.com/dictionary/of

[6] Oxford at 1592

[7] Oxford at 1218

[8] Oxford at 1219

[9] Oxford at 16

[10] Oxford at 1217

[11] Oxford at 414