Sixth Circuit Finds No Coverage for Property Damage Caused by Faulty Workmanship

Tred Eyerly | Insurance Law Hawaii | October 5, 2015

The Sixth Circuit affirmed the lower court’s order granting summary judgment to the insurer who denied a defense for a construction defect claim.┬áSteel Supply & Eng’g Co. v. Illinois Nat’. Ins. Co., 2015 U.S. App. LEXIS 14363 (6th Cir. Aug. 13, 2015).

Steel Supply contracted with the Carmel Redevelopment Corporation to fabricate and erect steel for a construction project in Carmel, Indiana. After the steel was erected, an iron worker at the site discovered defects in the steel. Subsequent investigations revealed additional defects.

Carmel filed suit against Steel Supply for breach of contract. The complaint alleged that a critical connection that Steel Supply designed was inadequate to handle the forces coming onto it. Carmel claimed that the immediate need to remediate the steel damaged Carmel directly, and that other contractors sought damages from Carmel for harm caused by the delays.

Illinois National initially assumed the defense of Steel Supply, but later withdrew the defense. Supply Steel then sued Illinois National. The district court granted summary judgment to Illinois National.

In applying Michigan law, the Sixth Circuit affirmed. As a general matter, mere faulty workmanship did not constitute an occurrence. Michigan courts, however, recognized an exception:…

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