Continental Insurance Co. v. Louis Marx & Co.

Exclusion (k), known in the insurance community as a “business risk” exclusion, contains essentially three provisos. In order for liability for bodily injury or property damage to be excluded from coverage under Continental’s policy, the following conditions must all occur:(1) the injury or damage must result from the failure of the insured’s product to perform the function or serve the purpose intended by the insured;(2) such failure must be due to a mistake or deficiency in design or design-related areas; and(3) the injury or damage must not result from active malfunctioning of the product.

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