Insurer must defend fabricator against bubbling paint claims

A Wisconsin appeals court Tuesday reversed a ruling relieving an insurer from defending a metal fabricator against customer claims arising from the use of paint on aluminum balconies that bubbled and peeled.

A three-judge panel of Wisconsin’s Court of Appeals District I said in Frankenmuth Mutual Insurance Co. v. Midwest Stairs & Iron Inc. that the lower court erred when finding that because the paint and balconies were an integrated system, Midwest did not sustain any property damage.

When fabricating the balconies, Midwest used a powder coat finish that required a multistep paint application process. From April 2019 until March 2020, it used a paint containing a chemical additive, Ecophor B700 Plaforization, commonly referred to as “plaf,” to help the paint stick to the balconies.

The company stopped using the additive after receiving complaints about the bubbling and peeling of paint on balconies at several projects, court records show.

Midwest sought nearly $2 million in coverage from Frankenmuth in July 2020 for damage to the balconies. The insurer denied the claim and then sued Midwest, seeking a court order on its coverage obligations.

The Frankenmuth, Michigan-based insurer moved for summary judgment and the judge agreed that Midwest did not sustain any property damage that would necessitate coverage under its commercial general liability policy. The judge also said Midwest could not obtain coverage under an errors and omissions policy.

Representatives for the parties did not respond to requests for comment.