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The 'Your Product' Exclusion: When CGL Coverage Ends at the Product Itself
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In December 2006, a building supply company in Shediac, New Brunswick sold 179 pieces of exterior vinyl siding to a residential property owner, with installation completed in July 2007. By June 2010, the siding had begun to blister and peel; the manufacturer replaced the defective sections at no charge. In 2012, the same failure recurred across the entire installation, and a contractor determined that all siding required removal and replacement.

The property owner commenced an action against the supplier in April 2013, claiming breach of contract and statutory warranty, and seeking $68,229.40 in damages. The supplier's commercial general liability insurer initially agreed to investigate but by October 2013 denied coverage, invoking a "your product" exclusion. The supplier contends the claim extends to collateral property damage—insulation, vapour barriers, structural components—that would fall within coverage.

Distinguishing Product Replacement Costs From Collateral Property Damage Claims

When a residential property owner in Shediac, New Brunswick, watches the siding on her home begin to warp, crack, and eventually fall away from the exterior sheathing, she experiences two distinct forms of harm that the law treats very differently for insurance purposes. The first is the cost of removing and replacing the 179 pieces of defective siding themselves, an expense that she calculates at a substantial portion of her total claim of $68,229.40 in damages. The second category encompasses everything else the failing siding damaged as it deteriorated: the moisture that infiltrated the wall cavities, the rot that spread to the oriented strand board sheathing beneath, the mould that colonized the insulation, and the interior drywall that buckled from prolonged exposure to water vapor. These two categories of loss flow from the same product failure, occur on the same property, and appear in the same statement of claim against the building supply company that sold the siding and the contractor who installed it. Yet commercial general liability insurance draws a sharp boundary between them, a boundary that determines whether the insurer must respond to the claim at all. Understanding exactly where that boundary falls, and why the law insists on maintaining it, is essential for anyone managing a coverage dispute of this kind.

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