APPEAL from the Circuit Court of McHenry County; the Hon.
CHARLES S. PARKER, Judge, presiding.
MR. JUSTICE SEIDENFELD DELIVERED THE OPINION OF THE COURT:
Pittway Corporation, the plaintiff (hereinafter Pittway), appeals from a summary judgment denying insurance coverage under its policy with the defendant, American Motorists Insurance Co. (American). Pittway also appeals from an order which dismissed its claim against the defendant, Marsh & McLennan, its insurance broker.
The claim against American arised from Pittway's exposure to liability for selling defective valve assemblies used in aerosol cans. The essential question is one of policy coverage.
Seaquest Valve, a division of Pittway, assembled the valves for use in aerosol cans from components furnished by others. Pursuant to an order from Helene Curtis, the distributor of hair spray, Seaquist Valve, ordered plastic valve bodies, a component of the valve assemblies, from Karnel Industries, a molder of plastic products. Seaquist provided Karnel with plans, specifications and a mold. Seaquist incorporated the valve bodies which it received from Karnel into its production of valve assemblies which it then delivered to Connecticut Chemical of Canada, Limited, who incorporated the valve assemblies into aerosol cans filled with hair spray. The hair spray products were then distributed by Helene Curtis.
Helene Curtis, however, was forced to scrap some of these aerosol hair spray products because of a leakage of hair spray which occurred when the aerosol was activated, a problem referred to in the industry as a "blowby." Helene Curtis made a claim for damages which Seaquist settled by paying $5,123.66. The parties refer to this as the "first loss."
From its investigation Seaquist believed that the malfunction was caused because the valve bodies furnished by Karnel had a "knife edge" rather than a "flat seat" as required by the specifications. Seaquist believed, however, that it was not a major departure from the specifications and that it could compensate for the defect by "clinching" the plastic valve body very tightly into the valve assembly. In his deposition a Seaquist executive stated that he believed that only a defective plastic valve body "in conjunction with a clinch which was on the weak end of our tolerances" would cause the malfunction.
After Seaquist had again supplied defective plastic valve bodies to Connecticut Chemical for use in Helene Curtis spray cans it found the "clinching" would not compensate for the defect and thus would not prevent "blowby." Both Connecticut Chemical and Helene Curtis made claims against Seaquist. On investigation of a random sample every can exhibited "blowby" leakage problems. Helene Curtis determined the product was not saleable and with the consent of Seaquist all of the products in issue were taken to a disposal dump. The parties referred to this as the "second loss."
Pittway notified American of both losses on April 24, 1970, some 16 months after it had received formal notice of the first loss from Helene Curtis on December 27, 1968. American denied coverage. Plaintiff settled the "second loss" for $47,215 and seeks recovery under the American policy. *fn1
Various provisions of the American insurance policy bear on the issues. First, we must consider whether the damage incurred by Connecticut Chemical and Helene Curtis constitutes "property damage" under the insurance policy. The policy may be generally characterized as providing for comprehensive general liability coverage. As material to the issue of property damage, the policy states:
"The company will pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of * * * B. property damage."
And in the "Definitions," it states:
"`damages' includes damages * * * for loss of use of property resulting ...