M Consulting & Export, LLC v. Travelers Casualty Insurance Co. of America, 2 F. Supp. 3d 730

Background

M Consulting and Export (Plaintiff) contracted with Wine & Spirits Expo, LLC d/b/a Cork N Bottle to purchase 500 cases of sparkling wine for shipment to West Africa; only ~300 cases arrived.
Plaintiff obtained a default judgment against Cork N Bottle in Maryland state court for breach of contract/conversion and then sued Cork N Bottle’s insurer, Travelers Casualty Insurance Co. of America (Defendant), seeking recovery under Cork N Bottle’s commercial general liability (CGL) policy.
The CGL policy covered sums the insured became legally obligated to pay for “bodily injury” or “property damage” caused by an “occurrence” and defined "occurrence" as an "accident."
The policy defined "property damage" to include either physical injury to tangible property or loss of use of tangible property not physically injured, but it also contained exclusions for (a) damage to "your product" and (b) damage to property not physically injured arising out of a delay or failure to perform a contract.
Travelers moved for summary judgment, arguing (1) no property damage/occurrence under the policy and (2) even if coverage existed, exclusions (notably the contractual-performance exclusion) bar recovery. The court granted Travelers’ motion.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether Plaintiff’s loss constitutes "property damage" under the policy	Loss or conversion of the wine equals property damage (physical injury or loss of use)	Missing/converted goods are not physical injury; no evidence of physical damage or compensable loss of use	Held: Not physical injury; plaintiff failed to show compensable loss of use for coverage
Whether the loss was caused by an "occurrence" (i.e., an "accident")	Cork N Bottle’s failure to deliver full shipment was accidental/negligent and thus an occurrence	Loss arises from contractual failure (foreseeable) so not an unexpected accident under Maryland law	Held: Not an occurrence — loss was foreseeable contractual nonperformance, not an "accident"
Whether the policy’s contractual-performance exclusion (damage to property not physically injured arising out of failure to perform a contract) applies	Plaintiff frames claim as negligence, not contract, so exclusion shouldn’t apply	Exclusion applies regardless of label because injury flowed from insured’s failure to perform the contract	Held: Exclusion applies — loss arose out of Cork N Bottle’s failure to perform, so coverage barred
Whether other policy exclusions (e.g., "your product") bar coverage	Plaintiff did not concede those exclusions were controlling; focused on coverage generally	Defendant argued multiple exclusions may preclude recovery; primary reliance on contractual-performance exclusion	Held: Court did not reach full merits of "your product" exclusion after finding no coverage and applying section I.A.2.m exclusion

Key Cases Cited

Sheets v. Brethren Mut. Ins. Co., 342 Md. 634 (1996) (adopted dictionary definition of "accident"; negligent acts are "accidents" only when resulting damage was unforeseen or unexpected by insured)
French v. Assurance Co. of Am., 448 F.3d 693 (4th Cir. 2006) (applying Maryland law on insurance contract interpretation and scope of coverage)
Travelers Indem. Co. of Am. v. Jim Coleman Auto. of Columbia, LLC, 236 F. Supp. 2d 513 (D. Md. 2002) (economic loss from insured’s conduct, without physical property damage, is not an "accident" or covered property damage)
Lemer Corp. v. Assurance Co. of Am., 120 Md. App. 525 (1998) (costs incurred to satisfy contractual bargain for latent defects are foreseeable and not covered as accidental property damage)
Northern Assurance Co. v. EDP Floors, Inc., 311 Md. 217 (1987) ("arising out of" in exclusions interpreted broadly; causal link construed under "but for" test)
Collin v. American Empire Ins. Co., 21 Cal. App. 4th 787 (1994) (distinguishes "loss of use" from total loss; conversion generally yields replacement value, not loss-of-use damages)