In Lexington Ins. Co. v. Chicago Flameproof & Wood Specialties Corp., No. 19-1062 (7th Cir. February 27, 2020) (N.D. Ill., E. Div. Affirmed), the Seventh Circuit affirmed the trial court which determined that an American International Group Inc. unit has no duty to defend a lumber company in a case in which it had sold fire-retardant lumber that was not properly certified. The District Court did not err in granting plaintiff-insurance company’s motion for summary judgment in action seeking declaration that it had no duty to defend defendant-insured in three underlying actions alleging that defendant was guilty of either fraudulent or negligent misrepresentation in supplying customers with non-certified lumber that caused damage to other aspects of customers’ building projects.
The District Court could properly find that if defendant had supplied non-certified lumber, then resulting damage in tearing out said lumber and replacing it with certified lumber could not be said to have been caused by “accident,” as required for coverage under relevant policies. ?The underlying complaints do not trigger Lexington?s duty to defend because they do not allege an ?occurrence,?? which under the policy is an accident that under Illinois law is ?an unforeseen occurrence,? said the ruling.
Moreover, ?[t]he underlying complaints allege no ?unforeseen,? ?undesigned? or ?unexpected? event,? said the ruling. The alleged damage ?was the natural and ordinary result of Chicago Flameproof?s deliberate decision to supply, and conceal that it had supplied, uncertified lumber,? the appeals court panel said in affirming the lower court?s ruling. The fact that the defendant believed that the supplied lumber would have eventually been certified did not require different result.