{"id":888478,"date":"2016-05-03T14:20:47","date_gmt":"2016-05-03T20:20:47","guid":{"rendered":"https:\/\/www.myconstructionexpert.com\/blog\/?p=888478"},"modified":"2016-05-03T14:20:47","modified_gmt":"2016-05-03T20:20:47","slug":"tips-in-evaluating-coverage-for-construction-defect-claims","status":"publish","type":"post","link":"https:\/\/www.myconstructionexpert.com\/blog\/tips-in-evaluating-coverage-for-construction-defect-claims\/","title":{"rendered":"Tips in Evaluating Coverage for Construction Defect Claims"},"content":{"rendered":"

James T. Dixon, P. Wesley Lambert and Amanda M. Leffler | Brouse McDowell | April 14, 2016<\/p>\n

Construction activity exploded in 2015, and analysts predict that 2016 will be another strong year for the industry. While this is positive news, more new construction means more construction defect litigation. So if you\u2019re a contractor, subcontractor, landowner, or developer, it\u2019s critical that you are properly evaluating and managing these risks.<\/p>\n

Faced with construction defect claims<\/a>, companies will likely look to their commercial general liability (CGL) policies for help. And if they make a claim against their policy, there\u2019s a fair chance that their insurer will deny coverage. Indeed, whether CGL insurance covers property damage arising from construction defects remains a hotly-contested issue across the country. And in Ohio, coverage disputes have become more frequent due to court decisions ostensibly limiting a contractor\u2019s ability to obtain coverage for defective work.<\/p>\n

CGL Coverage for Defective Construction Claims<\/strong>. CGL insurance provides liability coverage that protects a policyholder against third-party claims<\/a> for bodily injury or property damage arising out its business operations. The standard CGL policy covers \u201cproperty damage\u201d that is caused by an \u201coccurrence.\u201d The central issue in many coverage disputes involving a construction defect claim centers on the word \u201coccurrence.\u201d<\/p>\n

Courts in several states, including Ohio, have limited coverage for construction defect claims, finding that defective work itself is not an accident, but a foreseeable business risk. The seminal case on this issue in Ohio is Westfield Ins. Co. v. Custom Agri Sys<\/em>., 133 Ohio St.3d 476 (2012).<\/p>\n

Although insurers frequently cite to Custom Agri<\/a> to argue that there is no coverage for any defective construction or faulty workmanship claims under Ohio law, the Supreme Court\u2019s decision was not so sweeping. Rather, the Court adopted the rule that construction defects are covered \u201coccurrences\u201d within the meaning of CGL policies to the extent that property other than the policyholder\u2019s own work is damaged.<\/p>\n

When facing a construction defect claim<\/a>, policyholders should remember the following:<\/p>\n