Archer Daniels Midland Company (Archer) owned and operated a plant that used a fermentation process to produce high purity beverage-grade alcohol. They contacted Vogelbusch USA, Inc. (Vogelbusch) and asked the Insured to engineer and design a high purity ethanol dehydrator to install at the alcohol plant. The dehydrator would receive "raw alcohol" produced by the plant's existing distillation process and produce dehydrated, beverage-quality alcohol as well as byproduct that could be used again in the plant's distillation process. The Insured performed the job but Archer claimed that the unit did not produce beverage-grade ethanol because of the presence of a contaminant in the finished product. Vogelbusch filed a breach-of-contract action against Archer for nonpayment under the contract. Archer countered with its own suit alleging breach of contract, negligent misrepresentation, breach of implied warranty of merchantablity and breach of implied warranty.

Vogelbusch was covered under a commercial general liability (CGL) policy and a commercial umbrella policy, issued by two different State Farm insurance companies. Both policies were in force during the time period of Archer's counterclaim. State Farm refused to defend or admit coverage under either policy and Vogelbusch sued them, alleging breach of contract. Vogelbusch asked for a declaratory judgment that State Farm had a duty to defend and indemnify against Archer's counterclaim. The trial court denied Vogelbusch's motion. Vogebusch appealed.

The appellate court reviewed the relevant language in the CGL and umbrella policies and concluded that they excluded coverage if the property damage was caused by a product that the Insured no longer possessed or by work that Vogelbusch had completed. The appellate court affirmed the trial court decision to grant State Farm's motion for summary judgment.

(8049) VOGELBUSCH USA, INC., Appellant, v. STATE FARM LLOYDS and State Farm Fire & Casualty Co., Appellees. Texas Court of Appeals. No14-03-00600-CV. Filed July 13, 2004. Affirmed. 2004 CCH Personal and Commercial Liability Cases. Paragraph 8049.