Ohio Supreme Court Finds No
Coverage for Faulty Workmanship Claim
In
Ohio Northern University v. Charles Construction Services, Inc.
, the Ohio Supreme Court addressed whether a commercial general liability policy covered a general contractor for property damage caused by its subcontractor’s defective work. C
harles Constr. Svs., Inc.
, No. 2017-0514, 2018 WL 4926159 (Ohio Oct. 9, 2018).
The insured, Charles Construction, contracted to build an inn for Ohio Northern University. After the work was completed, the university discovered water damage and sued Charles Construction, which, in turn, filed third-party actions against subcontractors with whom it had contracted to perform the work. Charles Construction tendered the lawsuit to its insurer, Cincinnati Insurance Company (“Cincinnati”), which sought a declaratory judgment that it had no duty to defend or indemnify. The trial court granted summary judgment to Cincinnati, relying on
Westfield Insurance Company v. Custom Agri Systems, Inc.
, 979 N.E.2d 269 (2012), in which the Ohio Supreme Court held that claims for faulty construction are not claims for “property damage” caused by an “occurrence.” The appellate court, however, reversed, interpreting the
Custom Agri
decision as applying to preclude coverage for defects caused by the insured’s own work, but not for damage caused by its subcontractor’s faulty work.
The Ohio Supreme Court ruled that faulty workmanship is not an “occurrence,” when performed either by the named insured, or its subcontractor. Moreover, the court found that the “subcontractor exception” to the “your work” exclusion for property damage arising out of work performed by a subcontractor does not alter the analysis because faulty workmanship is not an occurrence in the first instance. Accordingly, unless the legislature intervenes, under Ohio law, there is no coverage under a commercial general liability policy for property damage caused by faulty workmanship.
