Two recent examples consistent with the existing case law: one involves what is covered damage to property and the other involves what is (not) excluded contamination.

In one case, a warehouse company inadvertently was not rotating stock as it should with the result that cans of juice were being held in inventory longer than intended. Once the mistake was realized, the juice was sold to retailers; the problem was that the “sell by” date was fast approaching (put differently, although the juice cans were being delivered such that they could be sold before the sell-by date, the retailer had a shorter time period than ordinarily was the case within which to sell the product). Consequently, retailers were unwilling to pay the regular cost of the product. The question presented was whether the reduction in price – caused by depression on the demand side rather than by tangible degradation – was tantamount to loss from injury to the property. The New Jersey appellate court said yes. http://lawlibrary.rutgers.edu/decisions/appellate/a1586-03.opn.html
As the court explained:

“Here, what occurred was that the Splash beverage changed. Granted, it was not a change in material composition but in how the product was perceived by Campbell’s customers as a result of an undue passage of time. The change stemmed from [the warehouser’s] alleged fault in handling the task of product rotation. In our view, such a change is the functional equivalent of damage of a material nature or an alteration in physical composition. By reason of this change, and of the ensuing new perception of the covered property and its nature, the product lost value as much from the outdating as if it had turned sour or gone bad in some more tangible or material way. It occurred essentially in the same manner and with virtually the same effect. We conclude that the policy is clear as a matter of law in this respect.” (p. 11)

This case is an example of how broadly courts construe what I have elsewhere termed “prong 1” property damage coverage, that is, physical damage claims. See generally S. Wallace Edwards v. Cincinnati Ins., 353 F.3d 367, 375 (4th Cir. 2003) (exposure of hams to ammonia gas caused physical damage even if ammonia levels were not harmful). Had the court not found prong 1 coverage, coverage would have been triggered by prong 2 of the typical property damage definition, viz. loss of use of tangible property that is not physically injured. See Lucker Mfg. v. Home, 23 F.3d 808, 815 (3d Cir. 1994) (non-food context but key discussion on how a impact on demand for a product constitutes covered loss of use). The insured may have shied away from making the prong 2 arguments (which turned out not to be necessary), because there was a loss-of-use exclusion (though the context is such that it may not have applied even if the reduced price were considered as loss-of-use property damage).

In another case, a soft-drink manufacturer’s product had been contaminated with a substance that made it displeasing but not toxic. The manufacturer destroyed the affected bottles, and the court found there was damage to covered property and that a contamination exclusion in the policy did not apply. http://www.courts.state.ny.us/reporter/3dseries/2004/2004_09611.htm This is consistent with earlier case law. E.g., Allianz v. RJR Nabisco, 96 F. Supp. 2d 253 (S.D. N.Y. 2000).