Decker Plastics Inc. Plaintiff- Appellant
West Bend Mutual Insurance Company Defendant-Appellee
Submitted: March 11, 2016
from United States District Court for the Southern District
of Iowa - Council Bluffs
LOKEN, BYE, and KELLY, Circuit Judges. 
time in question, Al's, Inc. of Storm Lake, Iowa
("A1's"), packaged and sold landscaping
materials. Decker Plastics Corp. ("Decker") sold
plastic bags to A1's that A1's filled with
landscaping materials (sand and rock) and stored outdoors for
sale to its customers. Because Decker failed to manufacture
the bags with an ultraviolet inhibitor ("UVI"), the
bags deteriorated in the sunlight, causing small shreds of
plastic to commingle with A1's landscaping materials,
sometimes while still in A1's inventory and sometimes
after delivery to its customers. As the contaminant could not
be inexpensively separated from A1's products, Al's
had to clean spilled materials from customer sites, purchase
replacement bags from another supplier, and pay to clean up
its own premises.
sued Decker to recover its losses. Decker and A1's
settled the lawsuit, and Decker filed a claim with its
comprehensive general liability ("CGL") insurer,
West Bend Mutual Insurance Company ("West Bend").
West Bend denied coverage. Decker commenced this action in
Iowa state court. West Bend removed, invoking the district
court's diversity jurisdiction, and moved for summary
judgment on numerous grounds. The district court granted
summary judgment, concluding there was no
"occurrence" triggering coverage under the terms of
West Bend's policy as construed in Pursell Constr.,
Inc. v. Hawkeye-Sec. Ins. Co., 596 N.W.2d 67, 70 (Iowa
1999). Decker appeals. Iowa law governs our interpretation of
the West Bend policy. Reviewing the grant of summary judgment
de novo, we conclude there was an occurrence.
Accordingly, we reverse and remand.
West Bend policy provided coverage for an
"occurrence" resulting in "property
damage." Like the policy at issue in Pursell,
596 N.W.2d at 70, West Bend's policy defined
"occurrence" as "an accident, including
continuous or repeated exposure to substantially the same
general harmful conditions." Under Iowa law, an
"accident" is "an undesigned, sudden, and
unexpected event, usually of an afflictive or unfortunate
character, and often accompanied by a manifestation of force.
. . . [The term] clearly implies a misfortune with
concomitant damage to a victim, and not the negligence which
eventually results in that misfortune." Id.
Pursell, the Supreme Court of Iowa considered
whether the insurer's CGL policy covered third party
negligence and breach-of-contract claims against the insured,
a construction contractor whose defective workmanship --
building the lower levels of two houses below the floodplain
-- required costly remedies to bring the houses into
compliance with a local ordinance. 596 N.W.2d at 68. The
court held there was no occurrence triggering coverage:
We agree with the majority rule and now join those
jurisdictions that hold that defective workmanship standing
alone, that is, resulting in damages only to the work product
itself, is not an occurrence under a CGL policy.
Id. at 71; accord Liberty Mut. Ins. Co. v. Pella
Corp., 650 F.3d 1161, 1175-76 (8th Cir. 2011) (defective
windows); Norwalk Ready Mixed Concrete, Inc. v. Travelers
Ins. Co., 246 F.3d 1132, 1136-37 (8th Cir. 2001) (faulty
concrete work that damaged a parking lot). West Bend argued,
and the district court agreed, "that A1's claimed
losses against Decker Plastics, as foreseeable and expected
consequences of Decker Plastics' defective workmanship
[omitting UVI from the bags it sold A1's], did not result
from an 'accident, ' and were not an
'occurrence' under" West Bend's policy.
disagree with this analysis because it disregards the Supreme
Court of Iowa's narrow holding in Pursell --
that a claim of "defective workmanship standing alone,
that is, resulting in damages only to the work product
itself, " is not an occurrence. 596 N.W.2d at 71. Here,
Decker's defective bags were sold to its customer,
A1's, which then used the bags to store its own property,
landscaping materials. The defective bags unexpectedly
deteriorated, causing damage to A1's other property. The
deterioration of the bags was the covered occurrence. To
rephrase Pursell's definition of "accident,
" the occurrence was "a misfortune with concomitant
damage to a victim [A1's], and not the negligence [of
Decker] which eventually result[ed] in that misfortune."
The covered property damage (if any) was to A1's property
other than the bags.
repeatedly construed "occurrence" to cover damages
to property that was not the insured's work product. In
National Union Fire Insurance Co. v. Terra Industries,
Inc., contaminated carbon dioxide was sold to third
party manufacturers and incorporated into consumer beverages.
346 F.3d 1160, 1164-65 (8th Cir. 2003). Applying Iowa law, we
concluded that the incorporation of the contaminated product
into a third-party product "constituted an occurrence
resulting in property damage." Id. at 1165
(quotations omitted). In Ferrell v. West Bend Mutual
Insurance Co., a case factually similar to this, we held
that the deterioration of defective protective film that
caused damage to the customer's tomato plants was a
covered occurrence. 393 F.3d 786, 795 (8th Cir. 2005)
(applying Wisconsin law). Perhaps most tellingly, in
Lexicon, Inc. v. ACE American Insurance Co., we
applied Arkansas law that included the same definition of
"occurrence" as Pursell and held that the
collapse of a defective silo causing damage to the
purchaser's contents and equipment was a covered
occurrence, but the damage to the insured's work product
-- the silo -- was not. 634 F.3d 423, 425-27 (8th Cir. 2011).
We predict that the Supreme Court of Iowa would follow the
reasoning of these cases and limit its holding in
Pursell to cases where the alleged
"occurrence" is "defective workmanship
standing alone, that is, resulting in damages only to the
work product itself."
these reasons, we reverse the district court's ruling
that there was no "accident, " therefore no
"occurrence, " and therefore no coverage of
Decker's claim. On appeal, West Bend urges us to affirm
on the additional alternative grounds it argued to the
district court -- that there was no "property
damage" triggering coverage, and that A1's claims
against Decker are excluded from coverage by the
contractual-liability exclusion, the "your product"
exclusion, and the impaired-property exclusion. However, as
in Lexicon, 634 F.3d at 428, we conclude that these
issues should initially be considered by the district court.
Accordingly, the judgment of the district court is reversed,
and the case is remanded for further proceedings not
inconsistent with this opinion.