Illinois “property damage”

In Amerisure Mut. Ins. Co. v. Microplastics, Inc., No. 09-3764 (7^th Cir. Sept. 20, 2010), insured Microplastics sold molding components to Valeo which Valeo in turn used to manufacture automobile door latch assemblies which it sold to automobile manufacturers.  After some of the automobile manufacturers complained about defective door latches, Valeo determined that Microplastics’ molding components were defective.  Valeo refused to pay for the molding components, Microplastics sued Valeo, and Valeo counterclaimed seeking damages for unspecified economic losses resulting from Microplastics’ breach of contract.  Microplastic tendered defense of the counterclaim to its CGL insurer, Amerisure, which denied a defense and filed suit seeking a judicial declaration of no duty to defend or indemnify.  The federal district trial court entered summary judgment for Amerisure, finding no duty to defend.  On appeal, the Seventh Circuit Court of Appeals affirmed.  Applying Illinois law, the court held that, absent any factual allegations of “property damage,” there was no duty to defend.   The court states that, under Illinois law, an “allegation of defective or faulty workmanship in the insured’s own products does not, by itself, allege ‘property damage’ under a standard CGL policy.”  The court does not address whether the defects in Valeo’s products resulting from Microplastics’ defective molds constituted “property damage.”