Question
Iowa Casualty insures Bill Stein Nut Co. Stein supplies peanuts to Mars Candy Co. Mars uses the peanuts supplied by Stein in the manufacture of
Iowa Casualty insures Bill Stein Nut Co. Stein supplies peanuts to Mars Candy Co. Mars uses the peanuts supplied by Stein in the manufacture of its Snickers Candy Bars. Mars discovers that a batch of peanuts supplied by Stein is tainted. It used peanuts from this batch in making candy bars with a value of $100,000. Mars notifies Stein of the problem and demands payment from Stein for the $100,000. Stein immediately notifies Iowa Casualty of the claim. Iowa Casualty investigates and sends a letter to Stein denying coverage for the claim. The letter states that Iowa Casualty agrees that the claim is for damages because of property damage caused by an occurrence, however, coverage is excluded because of exclusion m., the Impaired Property Exclusion. (answer in terms of the CGL policy)
Is Iowa Casualty correct, i.e., does the Impaired Property Exclusion apply? If so, why and if not, why not?
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