Products and Workmanship Exclusions were interpreted to apply to exclude coverage for a policyholder's claimed loss but for exceptions to the exclusions, in National Mfg. Co. v. Citizens Ins. Co. of Am., No. 13-314, 2016 WL 7491805 (D.N.J. December 30, 2016) (stated Not for Publication; precedential value apparently limited accordingly in District of New Jersey).
However, the District Judge found ambiguities in the exceptions to the exclusions. Therefore the Judge granted the policyholder's motion for summary judgment that there is insurance coverage for the claimed loss:
The exceptions contained in the Products and Workmanship Exclusions at best render the exclusions ambiguous and at worst incomprehensible. In light of causes of loss that are covered, the exclusions, and the exceptions to the exclusions, the policy language is circular. Under the Covered Cause of Loss section, all risks of direct physical loss are covered unless an exclusion or limitation applies. The exclusions then negate coverage under the Policy, unless the exceptions apply. The exceptions to the exclusions return the policyholder to the very place he started—the Covered Cause of Loss. The process then begins anew—covered causes of loss, exclusions, exceptions to the exclusions, and a return to covered causes of losses. Hence, the circular nature of the policy language.
National Mfg. Co. v. Citizens Ins. Co. of Am., No. 13-314, 2016 WL 7491805, at * 11 (D.N.J. December 30, 2016) (stated Not for Publication; precedential value apparently limited accordingly in District of New Jersey).
An alternative holding reached by other courts in other cases (and in other jurisdictions) is that exceptions to exclusions in an insurance policy cannot create (or provide) coverage. Under the District Court's analysis in National Manufacturing, however, exceptions effectively broaden coverage beyond the exclusions in which they are written.
There is an argument that that is the very reason that the exceptions were written, in other words, to broaden coverage and soften or limit the reach of the exclusions. Such is the approach effectively taken in National Manufacturing. It remains to be seen, of course, whether the approach taken by the Court in that case has persuasive value beyond the precedential value if any of the particular decision in that case.
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