The opinion of the court was delivered by: SOLOMON
Champion International Corporation (Champion) filed this action to recover $1,000,000 from Continental Casualty Company (Continental), one of Champion's insurers. This Court has jurisdiction under 28 U.S.C. § 1332.
Champion sells construction materials, among other things. In 1969 and 1970, Champion bought a large number of vinyl covered plywood panels from Continental Vinyl Products Corporation (Continental Vinyl). Champion then sold the panels to many manufacturers, who installed them in the interiors of houseboats, house trailers, motor homes and campers.
Many of the panels were defective; after they were installed, the vinyl covering peeled off and exposed the underlying raw plywood.
More than 1400 vehicles manufactured by at least 26 different firms were damaged by the defective panels. Champion assumed liability for the damages; it paid more than $1.6 million to settle the claims of the manufacturers and the purchasers of the damaged vehicles. The damage sustained by a single vehicle was always less than $5,000.
During 1969 and 1970, when it was discovered that many of the panels were defective, Champion was insured under two policies: a comprehensive general liability policy issued by Liberty Mutual Insurance Company (Liberty), and an umbrella excess third party liability policy issued by the defendant, Continental.
The Liberty policy provided Champion with the following coverage:
"The company will pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of . . . property damage to which this policy applies, caused by an occurrence . . . but the company shall not be obligated to pay any claim or judgment . . . after the applicable limit of the company's liability has been exhausted by payments of judgments or settlements."
Liberty's coverage was limited to $100,000 for each "occurrence", and $200,000 aggregate, with a $5,000 deductible per occurrence.
The Liberty policy defined "occurrence", "damages", and "property damage" as follows:
"'occurrence' means . . . an accident, including injurious exposure to conditions, which results, during the policy period, in bodily injury or property damage neither expected nor intended from the standpoint of the insured . . . ."
"for the purpose of determining the limit of the company's liability . . . all . . . property damage arising out of continuous or repeated exposure to substantially the same general conditions . . . shall be considered as arising out of one occurrence."
"'damages' includes . . . damages for loss of use of property resulting from property damage[.]"
"'property damage' means injury to or destruction of tangible property."
The Liberty policy contained a provision on occurrences which result in damage ...