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We have a client who was engaged to renovate a home. This involved replacing some flooring with secondhand tawa flooring to match existing. The flooring was purchased from a dealer but once laid and sanded back was found to be treated and tinted green, quite distinct from the natural golden tone of the existing tawa floor (of a similar age).

The homeowner is holding our client liable for this and we have lodged a PI claim on the basis of our client's error in selecting this flooring that fails to match the existing.

The insurer has accepted the policy is triggered but declined the claim under the Supply of Goods exclusion: "Arising from your sale, supply, installation or manufacture of goods". Our argument is that the insured has supplied a service, being the renovation, and has not supplied or installed goods as intended to be covered by this exclusion. Is the Supply of Goods exclusion being wrongly applied here?

Crossley Gates replies:

Assuming your client supplied the second hand Tawa and installed it, your client provided both goods (the Tawa) and services (installing it).

It looks like the error relates to supplying the wrong goods. Therefore the exclusion above would appear to apply.

Supplying incorrect goods is potentially a PL claim, but if there is no resultant damage beyond the mismatched flooring, there is unlikely to be cover under that policy either because of the products exclusion.

Your client would need a Products Guarantee Policy to cover it for its liability for the incorrectly selected flooring. I understand that type of policy is not commonly available in NZ and is expensive.

September 2021

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