United States: How To Fight For Coverage In Solar Panel Defect Claims

Originally published on Law360 (June 10, 2013)

Recently, the New York Times reported that "the $77 billion solar industry is facing a quality crisis just as solar panels are on the verge of widespread adoption." Reporter Todd Woody cited multiple reports of double-digit defect rates for installed components, mostly manufactured in China.

If the situation is as bad as the Times article implies, a wave of large lawsuits could be coming against solar panel manufacturers, the component manufacturers that supplied parts or materials used in the making of those panels, the panel distributors and dealers and the contractors who installed the panels.

Given the pace at which solar panels have been installed worldwide in recent years, and the pressure on manufacturers to cut prices and hence corners, this litigation wave could make the battles over liability and insurance coverage for Chinese drywall seem like a small claims dispute.

What can these businesses expect when they turn to their insurance companies for help with these claims?

Because solar panels are built into real property, insurance claims will be analyzed much as they have been for other waves of defective building materials. Over the last 25 years, these included Chinese drywall, exterior insulation finishing systems (EIFS), polybutylene plastic plumbing systems that leaked or burst after installation, asbestos-containing building materials (ACBM) and many others.

In short, we've been here before — and unfortunately, the history shows that insurance companies will refuse to honor coverage on many of these claims and will aggressively fight when policyholders are forced to sue for their coverage benefits. Here is a brief preview of likely insurance industry defenses and appropriate policyholder responses.

The Business Risk Doctrine

Insurance companies: Commercial general liability policies should not and do not cover property damage to the policyholder's own work or product and were never intended to do so.

Policyholders: The provisions of the policy fairly read as a whole, the drafting history of the policy and the industry's own current interpretation of it all contradict this simplistic notion. CGL policies provide a limited measure of malpractice coverage to its policyholders.

The "CGL Policies Aren't Performance Bonds" Argument

Insurance companies: CGL policies aren't performance bonds and therefore shouldn't be interpreted to cover the policyholder's defective work or product.

Policyholders: Insurance policies should be interpreted according to their terms, not simplistic rules of thumb. Again, the CGL policy has a limited malpractice component.

The Legally Obligated Requirement

Insurance companies: Tort claims, but not contract and warranty claims, are legal obligations, such that the latter do not satisfy the policy's "legally obligated" requirement.

Policyholders: What the policy means by "legally obligated" is that the claim must be adjudicated to the point that a binding judgment, arbitration award or settlement is required before the insurance company is required to pay the claim.

The As-Damages Requirement

Insurance companies: The majority of the damages sought in these cases are for economic damages, not damages for covered "property damage."

Policyholders: CGL policies cover not only property damage but also any and all damages resulting from covered property damage, including all economic damages.

The Occurrence Requirement

Insurance companies: The "occurrence" requires an accident, and the property damage involved with the solar panels was too reasonably foreseeable to qualify as an accident.

Policyholders: We certainly did not foresee any appreciable chance of the property damage that was later experienced.

The Property Damage Requirement

Insurance companies: Deterioration of the policyholder's work or product itself does not satisfy the "property damage" requirement.

Policyholders: The physical deterioration of the panels clearly satisfies the policy's "physical injury to tangible property" definition of "property damage."

The Contractual Liability Exclusion

Insurance companies: This exclusion for liability that is "contractually assumed" bars coverage for breach of contract and breach of warranty claims.

Policyholders: According to the policy drafters' intent, current insurance industry usage and the most reasonable interpretation of the exclusion's wording, "contractually assumed" liability refers to the policyholder's assumption of a third party's liability, such as by indemnity agreement. Therefore, the exclusion does not apply to liability to bar coverage for ordinary breach of contract and breach of warranty.

The Performing Operations Exclusion

Insurance companies: The property damage arises out of policyholder contractors' operations, so the exclusion applies.

Policyholders: The exclusion only applies to property damage actually occurring while those operations are being actively being performed, not afterwards.

The Incorrectly Performed Work Exclusion

Insurance companies: The policyholder contractor's work was incorrectly performed.

Policyholders: This exclusion does not apply to completed operations, and the property damage to the panels occurred after their operations were completed.

The Your-Product Exclusion

Insurance companies: This exclusion bars coverage for property damage to the manufacturers' or distributors' own products.

Policyholders: Once the panels were combined with the onsite labor of building them into the real property there, they ceased being "products" in that sense, all in accordance with the definition of "your products" in the policy itself, which says the exclusion cannot apply to real property.

The Your-Work Exclusion

Insurance companies: This exclusion bars coverage for property damage to panel installation contractors' own work.

Policyholders: By an exception at the end of the exclusion, it cannot apply to property damage to either their subcontractors' work or where the property damage arises from subcontractors' work.

The Impaired Property Exclusion

Insurance companies: This exclusion applies because the property damage arose from a "defect, deficiency, [or] inadequacy ... in 'your product' or 'your work.'"

Policyholders: The exclusion is incomprehensible, ambiguous and therefore unenforceable. Further, it does not apply to property that has been physically injured, which is the case with the deteriorated panels.

The Product Recall Exclusion

Insurance companies: The liability here is for a product recall; therefore, this exclusion applies.

Policyholders: A product recall involves withdrawing products that have not yet failed but which are being withdrawn from use because of a known or suspected defect that may cause them to fail in the future. Most of these claims only involve panels that have actually failed.

How Claims and Litigation May Play Out

How much liability will be covered in the end? That depends on too many factors to give a general prediction. The insurance companies' arguments will be weak in most cases, but they raise numerous issues, giving courts many opportunities to become confused and make the wrong decision on a critical issue. (That is, of course, why they raise such a long list of issues.) For policyholders, however, it generally pays to push back against these asserted coverage defenses, in many cases, following through with litigation.

The various U.S. jurisdictions are deeply divided over some of the coverage issues discussed above, so the question of which state's law applies in a given case will often be the first bone of contention. Once notice of the claim is given to the insurance company, in many cases, both parties will feel compelled to race to file the first lawsuit over coverage in their preferred jurisdiction.

Therefore, policyholders expecting big claims should have their coverage counsel in place and on top of the issues well before those claims come in and be prepared to furnish prompt notice to the insurance company. That way, a quick but well-analyzed response can be executed when the claims do come in — which, in some cases, will mean filing suit almost as fast as filing notice.

Once a claim is made against a policyholder, some jurisdictions are very strict in their enforcement of "timely notice" provisions requiring policyholders to notify their insurance companies within a fixed period, sometimes as short as a week, after learning about a potential loss or liability. So, it is very important that policyholders be prepared to give that notice promptly.

The fight over coverage will be very hard on small policyholders who do not have the legal sophistication or the financial and personnel resources to simultaneously fight the liability claims and intelligently pursue their coverage claims.

Larger policyholders who have those resources will probably fare well to reasonably well in the end — but usually only after a long fight. Larger claimants who expect that their targeted solar panel defendants will be insolvent before they can collect on their claim should tailor their liability claims toward the defendants' insurance coverage as insurance coverage will usually survive bankruptcy as a source for satisfying their claims against insolvent policyholders. Of course, this works much better if the coverage analysis is done before the liability suit is filed.

For all concerned, anticipation and thorough advance preparation may prove decisive in determining the extent of coverage and the outcome of coverage disputes.

Scott Turner is of counsel at Anderson Kill. He is a construction insurance attorney with experience securing insurance recoveries for property losses and in securing defense and indemnification for liability resulting from construction disputes and defects.

About Anderson Kill

Anderson Kill practices law in the areas of Insurance Recovery, Commercial Litigation, Environmental Law, Estate, Trusts and Tax Services, Corporate and Securities, Antitrust, Bankruptcy, Real Estate and Construction, Public Law, Government Affairs, Anti-Counterfeiting, Employment and Labor Law, Captives, Intellectual Property, Corporate Tax and Health Reform. Recognized nationwide by Chambers USA for Client Service and Commercial Awareness, and best-known for its work in insurance recovery, the firm represents policyholders only in insurance coverage disputes – with no ties to insurance companies and has no conflicts of interest. Clients include Fortune 1000 companies, small and medium-sized businesses, governmental entities, and nonprofits as well as personal estates. Based in New York City, the firm also has offices in Ventura, CA, Stamford, CT, Washington, DC, Newark, NJ and Philadelphia, PA.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions