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July 11, 2013 Articles

Insurance Coverage for Equitable Relief under ERISA

Must fiduciaries pay for remedies recently expanded by a U.S. Supreme Court decision, or can they pass the cost to their insurers?

by Sarah R. Anchors [1]

Before addressing the multitude of exclusions, an initial step in evaluating coverage under a commercial general liability (CGL) policy is whether the claim against the insured falls within the coverage clause—that is, whether there was bodily injury or property damage. Property damage takes many forms—from contaminated groundwater to a broken bridge to a water-logged computer to damaged currency. This article explores the definition of “property damage” and how courts throughout the country have applied the definition.

CGL policies cover amounts that an “insured becomes legally obligated to pay as damages because of ‘bodily injury’ or ‘property damage’ to which this insurance applies.” CGL policies generally define property damage as follows:

a. Physical injury to tangible property, including all resulting loss of use of that property. All such loss of use shall be deemed to occur at the time of the physical injury that caused it; or
b. Loss of use of tangible property that is not physically injured. All such loss of use shall be deemed to occur at the time of the “occurrence” that caused it.

CGL policies do not typically define “physical injury” or “tangible property.” Determining whether there was property damage can involve some interesting investigations about how the damage occurred, down to the very molecules that caused the physical injury. It also can have some seemingly arbitrary results. For example, a plaintiff’s lost profits resulting from the insured’s recommended fertilizer causing fewer seeds to germinate than expected was not property damage, but the farmer’s lost profits resulting from the fertilizer application causing deformed plants was property damage. If a $100 bill is destroyed, then there is property damage; but if $100 of electronic funds are converted, then there is no property damage.

Tangible Property: Can You Sense It?

The first question to consider is whether the subject property is tangible. Lacking a definition in the policy, courts generally use the dictionary definition.[2] Courts have defined “tangible” as “[d]iscernible by the touch; palpable” or “[p]ossible to touch.”[3] Intangible property is something that has a representative value or is evidence of value but does not have intrinsic value.[4]

Community Antenna Services illustrates the intricate analysis involved in determining whether property is tangible. The case involved claims that the insured made unlawful use of and willfully trespassed on the plaintiff’s cable television facilities, interfering with the plaintiff’s contracts with customers. The court stated:

The cable signal is carried on a cable. If the cable is cut and not capped, the signal can leak. . . . With signal leakage, the remaining signal strength is diminished. . . . Signal leakage may be worsened by moisture or corrosion. . . . When the signal leaks it interferes with aircraft and police and HAM radio signals. . . . Signal leaks can be measured with a vehicle-mounted monitor, which picks up the leak through an antenna. . . . The source of the leak can be further identified with a handheld monitor. . . . These cable signal characteristics are attributes of tangible and corporeal property rather than intangible, incorporeal, or theoretical entities.[5]

There are a myriad of cases evaluating the tangible qualities of nearly every type of property imaginable. The quintessential forms of intangible property are loss of reputation, goodwill, or identity.[6] Money in a bank account,[7] business methods, and investments[8] are also intangible property. In contrast, real estate is tangible property.[9] The soil and groundwater of a real property are tangible, and contamination can constitute property damage.[10] A possessory interest in property, such as an oil and gas lease, is tangible property.[11] However, a non-possessory interest, such as a license or easement to use property for recreational purposes, is not tangible property.[12] As one court held, the interference with a non-possessory interest in another’s land was not something that could be touched, seen, or smelled, and therefore was akin to an intangible loss of investment.[13]

Courts have held that the aesthetic impact on property is not tangible.[14] In Down Under Masonry, the underlying plaintiff alleged that the contractor/insured installed inferior roof shingles. But the plaintiff did not allege there was any physical injury, defect, or loss of use in the shingle material or caused by the shingles to the structure. The court held that the aesthetic impact on property value from the inferior shingles was not physical injury to property damage.[15]

Cash may be considered “tangible property” if the currency itself was actually destroyed or damaged.[16] Electronic funds, however, are intangible property.[17] The District of Nevada held that the conversion of money by someone taking currency by hand from another—even though the bills themselves were not damaged—was a loss of tangible property.[18]

Loss of data, information, or an idea is not loss of tangible property; but damage to the storage medium that held the data, information, or idea is physical damage to tangible property.[19] The Fourth Circuit walked through an explanation of how a computer code works to explain the difference between damage to the computer itself and loss of use of an idea:

With this description, albeit simplified, the distinction between data or instructions and the physical machines that give them meaning becomes apparent. Instructions to the computer and the data and information processed by it are abstract ideas in the minds of the programmer and the user. The switches and the magnetic disks are media, as would be paper and pencil. Loss of software or damage to software thus is not damage to the hardware, but to the idea, its logic, and its consistency with other ideas and logic. Of course, without any code and instructions, the hardware consists simply of millions of electronic switches, circuits, and drives that can be turned on or off but that cannot function as a computer. To a user, such a computer would be “dead.” But regardless of whether the software is rendered unusable, the hardware remains available for instructions and recording.[20]

The court therefore held that while the policy coverage for “physical damage to tangible property” covered physical damage to circuits, switches, drives, and the like, it did not encompass damage to data and software, “i.e., the abstract ideas, logic, instructions, and information.”[21]

In evaluating whether the damage qualifies as property damage, it is, as always, important to look at the language of the policy, including any endorsements, because they may include certain intangible property in the definition. Other types of policies, such as errors and omissions policies, often cover loss and damage to intangible property.

Was There Physical Injury?

There are two types of property damage: physical injury to the property and loss of its use, even if it was not physically injured. In examining the former, courts look at whether the tangible property was “altered in appearance, shape, color or in other material dimension.”[22]

Economic losses. Economic loss alone, without any accompanying damage to or loss of use of tangible property, is not covered property damage. For example, in Auto-Owners Insurance Co. v. Carl Brazell Builders, Inc.,[23] the court held that the CGL policy did not cover claims that the plaintiffs’ homes were of lesser value because they were built on polluted property. The plaintiffs sued the policyholder for failure to disclose the presence of hazardous materials in the construction and sale of their homes.[24] The homeowners alleged that the failure to disclose caused the homeowners to suffer lower property values and other economic damages. The court held there was no duty to defend because the claims did not allege “physical injury”; mere diminution in property value is purely an economic loss.[25]

Akin to diminution in value, there is also generally no coverage for claims that are entirely based on lost wages or profits.[26]

But it is important to note that when the physical injury to, or loss of use of, tangible property results in economic loss, that loss does fall within coverage.[27] A recent Arizona case, Nucor Corp. v. Employers Insurance Co. of Wausau, demonstrates the argument about whether the plaintiffs’ damages involve intangible property (e.g., diminution in value or lost profits) or whether the diminished value or lost profits are damages because of property damage to tangible property. [28] In that case, the plaintiffs received a settlement payment for the diminution in their property values due to contaminated groundwater, even though their properties were not contaminated. The insured argued that coverage existed because there was property damage—the contamination of the groundwater—and the policy covers all resulting damages, including diminution of property value. It cited a Michigan case in which the plaintiff could not complete a tunnel because another contractor on the job caused a fire in the tunnel, and the plaintiff sued the insured for economic damages, including lost profits and increased labor costs.[29] The court held that the policy did not require that the tangible property that was damaged belong to the plaintiff.[30] Therefore, the Arizona policyholder argued, there is no requirement that the plaintiffs own the property that was contaminated so long as there was contamination and that contamination caused the plaintiffs’ damages. The insurer in the Arizona case pointed to a case that required the underlying claimant’s property be damaged (although that case involved different policy language).[31] The Arizona court declined to decide whether the property damage had to be to the underlying plaintiffs’ property because it held that in any case, the portion of the settlement for the plaintiffs’ stigma claims “is too unrelated to property damage to require indemnity.”[32]

Thus, when the underlying plaintiff alleges economic losses, such as diminution in value and lost profits, it is essential to analyze whether the losses are because of some physical injury or loss of use of tangible property, or whether the alleged economic losses are the only injury alleged.

Gases and odors. When the damage to the property can be seen, physical injury may be straightforward. However, there have been several cases discussing when a gas qualifies as change in a “material dimension.” The First Circuit held that the odor from a defective carpet that allegedly permeated a building was an alleged physical injury.[33] A New Hampshire case, involving leaking carbon monoxide and other gases from chimneys, distinguished the First Circuit opinion because the gases did not physically alter the property, and the homeowners were able to continue living in their homes, although they could not use their chimneys.[34]

Environmental injury. Generally, environmental damage is a physical injury to tangible property.[35] Courts have held that injury to the environment, even though the effects are not immediately felt, may still qualify as physical injury. In a Florida case, the plaintiff dredged a creek causing it to become wider and deeper.[36] The parties agreed that there were alterations to the land. Also, the restoration plan was to reverse the dredging project by transferring fill material back into the creek.[37] The court rejected the argument that the harm to the creek was minimal and that the creek was “of low functioning value before the dredging.” The court held that even if there was only partial damage, the tangible property does not have to be completely destroyed in order to be damaged.[38] “Moreover, the fact that negative impacts on the environment are not easily quantified, or immediately apparent upon observation, does not change the fact that the underlying cause of these impacts was a physical injury.” Injury had occurred, even though the effects, such as flooding and erosion, would increase over time. Along the same lines, a Vermont case held that contamination of groundwater was physical injury even if it was not severe; it did not matter whether the contamination exceeded government standards.[39]

Crops. Crop failures may not be covered if the seeds failed to germinate, but there may be coverage if there was physical damage to the seeds. In a Minnesota case, the farmers hired the policyholder, an agricultural consultant, to recommend fertilizer for their corn crop.[40] Using the recommended fertilizer, the farmers had only half the anticipated yield. The farmers sued the consultant for breach of contract, misrepresentation, negligence, and breach of warranties because they claimed the fertilizer failed to supply enough nitrogen for the corn.[41] The court held there was no coverage because the less-than-anticipated crop yield did not result from physical injury to the crop itself. In contrast, there was “physical injury” to the crop in an Idaho case.[42] The alleged misapplication of fertilizer by the policyholders’ machinery caused some of the underlying plaintiffs’ potato plants to form yellowed foliage; poor root systems; and slimmer, blemished, misshapen potatoes.[43] That physical damage to the plants, which led to a less-than-anticipated crop, was a covered loss.

Thus, to determine whether tangible property was physically injured, it is necessary to conduct a detailed analysis of the facts about how exactly the injury occurred.

Determining When There Is a Loss of Use

Courts have found a loss of use when tangible property becomes unusable because it cannot be sold or it is economically illogical to salvage it. In a Third Circuit case, the insured sold defective castings to the manufacturer of a system to anchor drilling platforms.[44] As a result, the drilling-platform manufacturer (Lucker) had to increase its costs to add additional safety features so the platforms complied with its customer’s safety requirements. The supplier’s insurer argued that Lucker did not suffer a loss of use of its property because it could still build functioning platforms with the defective castings. But Lucker did lose the economic use of its original platform design. Due to the defective castings, the customer was no longer willing to buy the platform in its original design.[45] The court found as follows:

[B]oth the purposes behind liability insurance and the case law interpreting liability insurance suggest that the loss of a non-physical use of a product, such as offering it for sale, should be considered a “loss of use”; and that the decreased value of a product because of loss of customer acceptance of the product is a “loss of use” within the meaning of the standard CGL policy.[46]

Similarly, in Anthem Electronics, Inc. v. Pacific Employers Insurance Co., the underlying plaintiff built scanners using the insured’s defective circuit boards, which caused the scanners to unexpectedly fail.[47] The plaintiff allegedly had to replace those scanners and incur expenses due to the loss of use of the scanners with the defective boards. The insurance company argued it did not have a duty to defend because there was no loss of use. The plaintiff’s customers suffered a loss of use of tangible property, the scanners, and as a result, the plaintiff allegedly suffered losses due to having to replace the scanners and diminished profits. It also lost the use of the unshippable scanners in its inventory. That loss of use of the scanners, the other property into which the insured’s defective boards were incorporated, was property damage.[48]

In an Indiana case, the court decided that there was property damage where the insured made graphics for the underlying plaintiff’s bottles of soap.[49] The plaintiff had trouble with the labels on some containers after it filled them with soap, and disposed of the defective containers. The claimant salvaged some soap from the defective containers but then scrapped the process because it was more expensive than merely using new soap. The insurance company argued there was no physical injury to the plaintiff’s property because the flaking off of the graphics on the outside of the containers did not physically injure the soap. The court found there was physical injury because the label defect required that the plaintiff destroy the soap containers, which were its own property.[50] The insurance company argued there was no loss of use because the plaintiff could have reused the soap from the defective containers and merely decided not to do so. The court found that when it is more expensive to salvage property than to scrap it, such extreme diminution in value is sufficient to constitute loss of use.[51]


A critical analysis is indispensable to determining what makes the property at issue tangible and whether that property suffered a physical injury or its use was lost. Once these two elements are satisfied, the next analysis is whether the damages are because of property damage, when that property damage occurred, and whether the insured is legally obligated to the pay the damages.

Keywords: litigation, economic loss, loss of use, lost profits, physical injury

Sarah R. Anchors is an associate with Quarles & Brady LLP, Phoenix.


[1] Ms. Anchors’ practice focuses on policyholder representation.
[2] E.g., Fid. & Deposit Co. of Md. v. Hartford Cas. Ins. Co., 215 F. Supp. 2d 1171, 1183 (D. Kan. 2002) (finding the Kansas Supreme Court would apply the “natural and ordinary meaning they convey to an ordinary mind” in interpreting the phrase “physical injury to tangible property” in an umbrella policy); Walker v. State Farm Fire & Cas. Co., 569 N.W.2d 542, 544 (Minn. Ct. App. 1997) (“Words not defined in an insurance policy must be given their ‘plain and ordinary meaning.’”), review denied (Minn. Dec. 22, 1997).
[3] Farm Bureau Mut. Ins. Co. v. Earthsoils, 812 N.W.2d 873, 876 (Minn. Ct. App. 2012) (quoting American Heritage Dictionary 1767 (4th ed. 2006)); see also Kazi v. State Farm Fire & Cas. Co., 24 Cal. 4th 871, 880 (Cal. 2001) (stating that consistent with an insured’s reasonable expectations, “‘tangible property’ refers to things that can be touched, seen, and smelled.”).

The District Court of West Virginia explored the definitions of “tangible” and “intangible.” Cmty. Antenna Servs., Inc. v. Westfield Ins. Co., 173 F. Supp. 2d 505 (S.D. W. Va. 2001). “Property that has physical form and substance and is not intangible. That which may be felt or touched, and is necessarily corporeal, although it may be real or personal.” Community Antenna Services,  173 F. Supp. 2d at 510 (quoting Black’s Law Dictionary (6th ed. 1990)). “Intangible property” is “used chiefly in the law of taxation [and] means such property as has no intrinsic and marketable value, but is merely the evidence and representative of value.” Community Antenna Services,  173 F. Supp. 2d at 510–11 (quoting Black’s Law Dictionary (6th ed. 1990). “Tangible property is necessarily corporeal.” Community Antenna Services,  173 F. Supp. 2d at 511. “In contrast, ‘incorporeal property’ is ‘that which consists in legal rights merely. The same as choses in action at common law.’ . . . ‘Incorporeal things’ are ‘things which can neither be seen nor touched, such as consist in rights only, such as the mind alone can perceive.’” Community Antenna Services,  173 F. Supp. 2d at 511 (quoting Black’s Law Dictionary (6th ed. 1990)).

[4] Mullin v. Travelers Indem. Co. of Conn., 541 F.3d 1219, 1223 (10th Cir. 2008) (“‘[P]roperty that does not have intrinsic value, but rather is merely representative or evidence of value,’ such as a stock certificate, is intangible property, not tangible property.”) (quoting 2 Allan D. Windt, Insurance Claims & Disputes: Representation of Insurance Companies & Insured § 11:1 at 11-3 to 11-4 (5th ed. 2007)); U.S. Fid. & Guar. Co. v. Barron Indus., Inc., 809 F. Supp. 355, 360 (M.D. Pa. 1992) (Intangible property, “such as property that represents value but has no intrinsic marketable value of its own[,]” includes stock, investments, copyrights, promissory notes, and “property regarded as intangible rights (i.e., goodwill and reputation), and economic interests (i.e., overhead, profits, investment value and productivity).”).
[5] Community Antenna Services, 173 F. Supp. 2d at 511 (citations omitted).
[6] Liberty Corp. Capital Ltd. v. Sec. Safe Outlet, Inc., No. 5:12-cv-178-KSF, 2013 U.S. Dist. LEXIS 42975, at *21 (E.D. Ky. Mar. 27, 2013) (citing Black’s Law Dictionary (9th ed. 2009)).
[7] Berkshire-Cranwell Ltd. P’ship v. Tokio Marine & Nichido Fire Ins. Co., 874 F. Supp. 2d 41, 48 (D. Mass. 2012).
[8] Lucker Mfg., Inc. v. The Home Ins. Co., 23 F.3d 808, 819 (3d Cir. 2004) (the insured manufacturer sold customer defective goods, which caused the buyer to lose the use of a system it had designed for a particular customer; finding under Pennsylvania and Wisconsin law that that loss of use was intangible property and not covered by the policy), distinguished by Wis. Label Corp. v. Northbrook Prop. & Cas. Ins. Co., 586 N.W.2d 29, 34 n.7 (Wis. Ct. App. 1998); Hartford Accident & Indem. Co. v. Case Found. Co., 294 N.E.2d 7, 13 (Ill. App. Ct. 1973) (investments, anticipated profits, and business ventures are intangibles).
[9] E.g., Oak Ford Owners Ass’n v. Auto-Owners Ins. Co., 510 F. Supp. 2d 812, 816  (M.D. Fla. 2007) (the definition, according to Black’s Law Dictionary, of “tangible property” includes real property); A.B.C. Builders, Inc. v. Am. Mut. Ins. Co., 661 A.2d 1187, 1190 (N.H. 1995) (finding “tangible property” to be ambiguous and construing it in the insured’s favor to include real property).
[10] E.g., Dallas Nat’l Ins. Co. v. Sabic Americas, Inc., 355 S.W.3d 111, 119 (Tex. App. 2011) (finding that alleged “damages to Plaintiff’s property, including wells, pumping stations, filters, and usufructuary rights to the water drawn from the aquifers” caused by the contamination, including contamination that gave the water a foul taste and odor that made it unusable, alleged “loss of use of tangible property”); Schnitzer Inv. Corp. v. Certain Underwriters at Lloyd’s of London,197 Or. App. 147, 160–61 (2005) aff’d,341 Or. 128 (2006).
[11] Energy Res., LLC v. Petroleum Solutions Int’l, LLC, Civ. No. H:08-656, 2011 U.S. Dist. LEXIS 91829, at *35–36 (S.D. Tex. Aug. 17, 2011).
[12] Robert Trotter Gift Fund for Thomas v. Trinity Universal Ins. Co., No. 03-05-00330-CV, 2007 Tex. App. LEXIS 7475, at *11–13 (Tex. App. Sept. 13, 2007), review denied,2008 Tex. LEXIS 39 (Tex. Jan. 11, 2008); see also Kazi v. State Farm Fire & Cas. Co., 24 Cal. 4th 871, 880–81 (Cal. 2001) (easement is akin to goodwill, an anticipated benefit of a bargain or an investment, imposed on the servient land, and thus is not tangible property).
[13] Robert Trotter Gift Fund, 2007 Tex. App. LEXIS 7475, at *11–13; see also Cunningham v. Universal Underwriters, 98 Cal. App. 4th 1141,1155–56 (2002) (following Kazi to find that the claimed interference with possession of real property under the lease, i.e., the landlord failed to give the tenant possession of the premises, was not damage to tangible property because the landlord’s actions gave the tenant the right to monetary damages but not the right to act as possessor of the real property on the transfer date).
[14] Down Under Masonry v. Peerless Ins. Co., 950 A.2d 1213 (Vt. 2008); see also Gulf Ins. Co. v. L.A. Effects Grp., Inc., 827 F.2d 574, 578 (9th Cir. 1987) (finding that under California law, the artistic value of the film is not tangible property, separate and apart from the actual strip of film).
[15] Down Under Masonry,950 A.2d at 1216.
[16] Coulter v. CIGNA Prop. & Cas. Cos., 934 F. Supp. 1101, 1123  (N.D. Iowa 1996) (“[M]oney might be considered ‘tangible property’ in situations where money has actually been destroyed or damaged.”); Sec. State Bank of Kansas City v. Aetna Cas. & Sur. Co., 825 F. Supp. 944, 947 (D. Kan. 1993) (“The destruction of a stack of currency could certainly be considered a destruction of tangible property. The moment it is destroyed[,] an irreversible loss of wealth has occurred. The destruction or loss of a check or other debt instrument is a different matter.”); Walker v. State Farm Fire & Cas. Co., 569 N.W.2d 542, 544 (Minn. Ct. App. 1997) (distinguishing between loss of tangible currency and loss of intangible economic value of promissory note).
[17] E.g., Carlon Co. v. Delaget, LLC, No. 11-CV-477-JPS, 2012 U.S. Dist. LEXIS 70836, at *19 (W.D. Wis. May 21, 2012) (finding that electronic bank account funds that were converted were not tangible property, and stating even though there may be coverage if those same funds were converted by hand, the liability policy’s use of the words “tangible property” and lack of inclusion of “lost money” dictates the result); Johnson v. Amica Mut. Ins.Co., 733 A.2d 977, 979 (Me. 1999) (“[B]ank account funds are ‘intangible property,’ because they have no intrinsic value and merely represent, or are evidence of, value.”).
[18] Capitol Indem. Corp. v. Wright, 341 F. Supp. 2d 1152, 1159 (D. Nev. 2004). The insured was a company that owned a retirement home and retained another company to manage the home. The principal member of the management company allegedly took a resident to the bank, made him sign for cash, and then converted that cash. Those actions led the court to find that the money was tangible property. In contrast, in Berkshire-Cranwell Ltd. P’ship v. Tokio Marine & Nichido Fire Ins. Co., 874 F. Supp. 2d 41, 47 (D. Mass. 2012), the court heldthat even if hard currency did change hands in the alleged conversion scheme, the unlawfully obtained “fee was still not retained for its tangible significance, like a framed hundred dollar bill, but merely deposited—based on its intangible transactional value—into Plaintiff’s bank account”; thus, the tangible property requirement was not met.
[19] E.g., Ward Gen. Ins. Servs., Inc. v. Emp’rs Fire Ins. Co., 114 Cal. App. 4th 548, 556 (2003).
[20] America Online, Inc. v. St. Paul Mercury Ins. Co., 347 F.3d 89, 95–96 (4th Cir. 2003).
[21] America Online, Inc., 347 F.3d at 96.
[22] Travelers Ins. Co. v. Eljer Mfg., Inc., 197 Ill.2d 278, 301–2 (2001); see also Farm Bureau Mut. Ins. Co. v. Earthsoils, 812 N.W.2d 873, 876 (Minn. Ct. App. 2012) (stating that physical injury means “damage or harm to the physical condition of a thing”) (citing American Heritage Dictionary 902, 1325 (4th ed. 2006)); Summit Custom Homes, Inc. v. Great Am. Lloyds Co., 202 S.W.3d 823, 828 (Tex. App. 2006) (“[T]he plain meaning [of ‘physical injury’] connotes an alteration in appearance, shape, color or other material dimension.”), abrogated on other grounds, Don’s Bldg. Supply, Inc. v. OneBeacon Ins. Co., 267 S.W.3d 20 (Tex. 2008).
[23] 588 S.E.2d 112, 116 (S.C. 2003).
[24] Carl Brazell Builders, 588 S.E.2d at 113.
[25] Carl Brazell Builders, 588 S.E.2d at 115. But see Walde v. Ass’n Ins. Co., 727 S.E.2d 631, 636–37 (S.C. Ct. App. 2012) (distinguishing Carl Brazell Builders where the underlying claimants alleged “property damage” by contending they could not make full use of the property after they were informed the barn did not comply with county regulations).

The 1966 version of the standard CGL policy defined “property damage” as “injury to or destruction of tangible property.” Eljer Mfg., Inc. v. Liberty Mut. Ins. Co., 972 F.2d 805, 810 (7th Cir.1992), cert. denied. “Under this definition of property damage, there is no doubt that diminution in value was a covered loss. [footnote omitted] However, the insurance industry revised the definition of property damage in 1973; the updated version was used in the Aetna policy. The 1973 policy specifically qualified ‘injury to tangible property’ with the word ‘physical’ modifying ‘injury’.” Aetna Life & Cas. v. Patrick Indus., Inc., 645 N.E.2d 656, 659 (Ind. App. 1995); see also Wisconsin Label Corp. v. Northbrook Prop. & Cas. Ins. Co., 233 Wis. 2d 314, 338 (2000) (explaining the same).

[26] E.g., H.E. Davis & Sons, Inc. v. N. Pac. Ins. Co., 248 F. Supp. 2d 1079, 1085 (D. Utah 2002). In that case, the insured allegedly failed to properly compact soil at a school construction site, but that faulty compaction did not cause physical injury to the property or a complete loss of use of the property. The damages were the insured’s cost to repair and replace the soil pad itself in response to the school district’s demands, and compensate the school district for the construction delays. The court held these were purely economic losses and did not qualify as “property damage”. Id. see also Fitch v. State Farm Fire & Cas. Co., 211 Mich. App. 468, 473-74 (1995) (loss of business opportunity and good will are economic losses).
[27] E.g., Anthem Elecs., Inc. v. Pac. Emp’rs Ins. Co., 302 F.3d 1049, 1057 (9th Cir. 2002) (applying California law, and stating “[w]e decline to hold that coverage is precluded simply because the extent of the [property] damage is expressed as economic loss”); Federated Mut. Ins. Co. v. Concrete Units, Inc., 363 N.W.2d 751, 757 (Minn. 1985) (“We conclude that the most sensible reading of the underscored phrase, ‘damages because of * * * property damage,’ requires the insurer to pay all damages which are causally related to an item of ‘property damage’ which satisfies either of the policy’s definitions.”); Safeco Ins. Co. v. Munroe, 165 Mont. 185, 192 (1974)(“[O]nce it has been found that tangible property is damaged, there is insurance coverage for all damages because the term ‘damages’ is used without limitation. . . .”).

For example, in a Minnesota case, cattle buyers claimed lost profits because their herds became infected from the insureds’ cows. Reinsurance Ass’n of Minn. v. Timmer, 641 N.W. 2d 302 (Minn. Ct. App. 2002). The cattle illness was property damage; therefore, the economic losses were covered because they were “sums for which [the insured] may be liable by law because of . . . property damage.” Timmer, 641 N.W. 2d at 312; see also Am. Home Assurance Co. v. Libbey‑Owens‑Ford Co., 786 F.2d 22, 26–27 (1st Cir. 1986) (concluding that phrase “because of . . . property damage to which this insurance applies” covers consequential damages attributable to property damage covered by policy, although distinguishing the policy’s language of “because of . . . property damage, as hereinafter defined”); Universal Underwriters Ins. Co. v. LKQ Smart Parts, Inc., 963 N.E.2d 930, 943–44 (Ill. App. Ct. 2011) (“Liability policies cover not only damages for property damage, but damages because of, on account of or by reason of property damage. Accordingly, once covered property damage exists, all consequential damages are covered * * *. In short, even though an item of damage is not covered as property damage, it can be covered if it constitutes a consequential damage flowing from covered property damage.”) (emphasis in original) (quoting Allan D. Windt, Insurance Claims and Disputes § 11.1, at 11-17 through 11-18 (5th ed. 2007)); DiMambro‑Northend Assocs. v. United Const., Inc., 397 N.W.2d 547, 550 (Mich. Ct. App. 1986) (consequential construction delay damages including lost profits and additional overhead and labor costs following fire in tunnel under construction were covered by CGL policy).

[28] 296 P.3d 74 (Ariz. Ct. App. 2012).
[29] Nucor Corp., 296 P.3d at 78 (citing DiMambro-Northend, 397 N.W.2d at 548 Shepardize ).
[30] Nucor Corp., 296 P.3d at 78 (citing AIU Ins. Co. v. Superior Court, 799 P.2d 1253, 1279–80 (1990), which found that the precipitating legal action by the government for contamination of property, and the resulting costs were incurred “because of” property damage, even though the government or its agencies did not have a “compensable proprietary interest in the property”).
[31] Nucor Corp., 296 P.3d at 79 (citing Spartan Petroleum Co. v. Federated Mut. Ins. Co., 162 F.3d 805, 809 (4th Cir. 1998) (finding that the property damage must be to the underlying claimant’s property because the policy required the insurer to defend any suit against the insured “seeking damages on account of such property damage” (emphasis added)).
[32] Nucor Corp., 296 P.3d at 79. A petition before the Arizona Supreme Court is pending, and the petitioner argues that there was physical damage to tangible property—the contamination of the groundwater—and therefore, the diminution-in-value claims are covered as “damages because of property damage.”
[33] Essex Ins. Co. v. BloomSouth Flooring Corp., 562 F.3d 399, 406 (1st Cir. 2009) (Massachusetts law).
[34] Concord Gen. Mut. Ins. Co. v. Green & Co. Bldg. & Dev. Corp., 8 A.3d 24 (N.H. 2010).
[35] E.g., S.C. Ins. Co. v. Coody, 813 F. Supp. 1570, 1575 (M.D. Ga. 1993) (“[I]t is clear that contamination of property by hazardous waste is a physical injury to tangible property.”).
[36] Oak Ford Owners Ass’n v. Auto-Owners Ins. Co., 510 F. Supp. 2d 812, 812 (M.D. Fla. 2007).
[37] Oak Ford Owners Ass’n, 510 F. Supp. 2d at 817.
[38] Oak Ford Owners Ass’n, 510 F. Supp. 2d at 817. 
[39] Towns v. Northern Sec. Ins. Co., 184 Vt. 322, 338–39 (2008).
[40] Farm Bureau Mut. Ins. Co. v. Earthsoils, 812 N.W.2d 873 (Minn. Ct. App. 2012).
[41] Earthsoils, 812 N.W.2d at 874–75.
[42] W. Heritage Ins. Co. v. Green, 54 P.3d 948 (Idaho 2002).
[43] Green, 54 P.3d at 952.
[44] Lucker Mfg., Inc. v. The Home Ins. Co., 23 F.3d 808 (3d Cir. 2004).
[45] Lucker Manufacturing, Inc., 23 F.3d at 815–16.
[46] Lucker Manufacturing, Inc., 23 F.3d at 816 (although the court found no coverage existed because the design of the platform was intangible property); see also Wells Dairy, Inc. v. Travelers Indem. Co. of Ill., 241 F. Supp. 2d 945, 966 (N.D. Iowa 2003) (“In the non-perishable cases, the tangible property remains in existence and capable of use, although at diminished value. With perishable tangible property, the diminution in value is caused by the spoliation of the tangible property thereby rendering the property useless. The court therefore holds Wells’s possible liability to Eskimo Pie could be based on ‘property damage,’ as that term is defined in the CGL coverage part of the Primary Policy. Thus, it is clear that the scope of the CGL coverage part of the Primary Policy covers Eskimo Pie’s claim for damages for loss of use to tangible property.”).
[47] 302 F.3d 1049, 1050 (9th Cir. 2002).
[48] Anthem Electronics, Inc., 302 F.3d at 1057–58. But see Wm. C. Vick Construction Co. v. Pa. Nat’l Mut. Cas. Ins. Co., 52 F. Supp. 2d 569 (E.D.N.C. 1999), aff’d, 213 F.3d 634 (4th Cir. 2000) (holding that there was no property damage where the subcontractor improperly applied waterproofing so that the building suffered water damage, because the policy language infers “that the property allegedly damaged has to have been undamaged or uninjured at some previous point in time,” and the property here was never constructed properly in the first place).
[49] Am. Ins. Co. v. Crown Packaging Int’l, 813 F. Supp. 2d 1027, 1040 (N.D. Ind. 2011).
[50] Crown Packaging International, 813 F. Supp. 2d at 1041.
[51] Crown Packaging International, 813 F. Supp. 2d  at 1043–44 (denying summary judgment on loss of use because there was a question of fact as to whether it truly was cheaper to scrap the soap than to salvage it).

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