{"id":892935,"date":"2017-09-21T08:43:27","date_gmt":"2017-09-21T14:43:27","guid":{"rendered":"https:\/\/www.myconstructionexpert.com\/blog\/?p=892935"},"modified":"2017-09-21T08:43:27","modified_gmt":"2017-09-21T14:43:27","slug":"coverage-construction-defects-caused-subcontractor-work","status":"publish","type":"post","link":"https:\/\/www.myconstructionexpert.com\/blog\/coverage-construction-defects-caused-subcontractor-work\/","title":{"rendered":"Coverage for Construction Defects Caused by Subcontractor Work"},"content":{"rendered":"<p>Amanda M. Leffler | <a href=\"https:\/\/www.lexology.com\/library\/detail.aspx?g=fe2c11e9-3ca6-4ee5-92aa-6833aa16ddaf&amp;utm_source=Lexology+Daily+Newsfeed&amp;utm_medium=HTML+email+-+Body+-+General+section&amp;utm_campaign=Lexology+subscriber+daily+feed&amp;utm_content=Lexology+Daily+Newsfeed+2017-09-13&amp;utm_term=\" target=\"_blank\">Brouse McDowell<\/a> | September 12, 2017<\/p>\n<p>The Ohio Supreme Court has held that claims for the cost to repair an insured\u2019s own defective work are not covered because they \u201care not claims for \u2018property damage\u2019 caused by an \u2018occurrence\u2019 under a [CGL] policy.\u201d See\u00a0<em>Westfield Ins. Co. v. Custom Agri Sys., Inc.<\/em>, 2012-Ohio-4712. In its decision, however, the Court approved of prior Ohio case law which held that consequential damages\u00a0<em>arising from<\/em>\u00a0a policyholder\u2019s defective work generally\u00a0<em>are<\/em>\u00a0covered by CGL policies. Since\u00a0<em>Custom Agri<\/em>, insurance practitioners and courts in Ohio have generally agreed that:<\/p>\n<ul>\n<li>Repair and replacement of a policyholder\u2019s own defective work is not \u201cproperty damage caused by an occurrence\u201d and is not covered by standard CGL policies; and,<\/li>\n<li>Consequential damages to property other than the policyholder\u2019s work is \u201cproperty damage caused by an occurrence\u201d and may be covered by a standard CGL policy depending upon the applicability of the policy\u2019s exclusions and conditions.<\/li>\n<\/ul>\n<p>Importantly, the\u00a0<em>Custom Agri<\/em>\u00a0Court did not address whether a typical CGL policy would provide coverage for the repair or replacement of defective work performed by the policyholder\u2019s subcontractors. A recent decision from one of Ohio\u2019s appellate courts suggests that defective work performed by a policyholder\u2019s subcontractors may be covered, regardless of whether the subcontractor\u2019s work caused any consequential damages.<\/p>\n<p>In 2008, Ohio Northern University contracted with Charles Construction Services (CCS) to construct a hotel and conference center.<em>\u00a0Ohio Northern Univ. v. Charles Constr. Servs., Inc.<\/em>, 2017-Ohio-258 (3rd Dist.). CCS retained several subcontractors to complete the work. After construction was completed, Ohio Northern discovered significant water intrusion and related damages, as well as serious structural defects, and brought suit against CCS.<\/p>\n<p>CCS tendered the claim to its insurer, Cincinnati Insurance Company, which argued that it had no obligation to defend or indemnify CCS. Cincinnati contended that, under\u00a0<em>Custom Agri<\/em>, property damages arising from defective work could\u00a0<em>never<\/em>constitute an occurrence, regardless of who performed the work. In response, CCS argued that\u00a0<em>Custom Agri<\/em>\u00a0was inapplicable because almost all of the work at issue had been performed by subcontractors,\u00a0<em>not\u00a0<\/em>by CCS, and because CCS had purchased products-completed operations coverage which applied to the defective construction claims arising from the work of its subcontractors.<\/p>\n<p>The trial court granted summary judgment to Cincinnati, but the Third District Court of Appeals reversed. In finding in favor of CCS, the appellate court analyzed the \u201cDamage to Your Property\u201d and \u201cDamage to Your Work\u201d exclusions, which expressly preserved coverage for damaged work or damages arising from faulty work if (1) the work was performed by a subcontractor, and (2) the damage occurred after construction was completed. The appellate court correctly noted that if it were to adopt Cincinnati\u2019s interpretation of the policy, it would render these provisions meaningless. The court found that, at a minimum, the provisions created an ambiguity that must be resolved in favor of the policyholder. Thus, the appellate court held that Cincinnati had a duty to defend and indemnify CCS.<\/p>\n<p>Interestingly, though not analyzed by the appellate court, even if the work at issue had been performed by CCS and not its subcontractors, the damages alleged by Ohio Northern would have required that Cincinnati defend CCS and indemnify at least a portion of any award against it. This is because Ohio Northern asserted claims not only for the repair and replacement of defective work, but also for consequential damages arising from such work. As noted above, the Supreme Court in Custom Agri cited with approval prior lower court opinions, which held that CGL policies cover such claims for consequential damages. Insurers and policyholders in Ohio continue to test the scope of the Ohio Supreme Court\u2019s decision in\u00a0<em>Custom Agri<\/em>. As in any case involving complex coverage analysis, policyholders should consider retaining experienced coverage counsel to assist in the claim process so as to best position their claim for coverage.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Amanda M. Leffler | Brouse McDowell | September 12, 2017 The Ohio Supreme Court has held that claims for the cost to repair an insured\u2019s own defective work are not covered because they \u201care not claims for \u2018property damage\u2019 caused by an \u2018occurrence\u2019 under a [CGL] policy.\u201d See\u00a0Westfield Ins. Co. v. Custom Agri Sys., Inc.,&hellip; <a class=\"more-link\" href=\"https:\/\/www.myconstructionexpert.com\/blog\/coverage-construction-defects-caused-subcontractor-work\/\">Continue reading <span class=\"screen-reader-text\">Coverage for Construction Defects Caused by Subcontractor Work<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false},"version":2}},"categories":[4,9914,9721],"tags":[9895,19,23,56,157],"class_list":["post-892935","post","type-post","status-publish","format-standard","hentry","category-construction-defects","category-insurance-coverage","category-property-damage","tag-advise-consult","tag-construction-defects-2","tag-insurance-coverage","tag-property-damage","tag-subcontractor","entry"],"jetpack_publicize_connections":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v25.0 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Coverage for Construction Defects Caused by Subcontractor Work - Advise &amp; 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