North Carolina “property damage.”

In Production Systems, Inc. v. Amerisure Ins. Co., No. COA04-580 (N.C. Ct. App. Dec. 21, 2004), insured PSI contracted with Rubatex to design, construct, and install production line systems in Rubatex’s manufacturing plant.  Almost immediately after PSI completed its work and turned the systems over to Rubatex, Rubatex experienced problems with the systems; specifically, the conveyor belt components failed, causing damage to other parts of the systems. After Rubatex refused to pay for the systems, PSI sued Rubatex.  Rubatex counterclaimed seeking damages for the repair and loss of use of the systems.   After PSI’s CGL insurers, Amerisure and Union, refused to defend, PSI settled with Rubatex and filed suit against Amerisure and Union seeking reimbursement.   The trial court granted summary judgment for the insurers.  On appeal, the intermediate appellate court affirmed, holding that “because the only ‘damage’ was repair of defects in, or caused by, the faulty workmanship in the initial construction,” there was no “property damage.”  The court states that “property damage” means damage to property that was previously undamaged.  Although the opinion indicates that PSI hired subcontractors to perform some of the work, there is no indication that the CGL form at issue included the subcontractor work exception to exclusion l.