A divided Ohio Supreme Court found last week that defective construction claims for faulty workmanship against an insured brought by a property owner are not property damage claims caused by an “occurrence” under a commercial insurance policy because they are not fortuitous. I teach insurance law and we spend a lot of time in class thin slicing fortuity and occurrence. So, I found this case of particular interest. But if the details of insurance law don’t interest you, I would stop reading now.
Plaintiff and defendant contracted for plaintiff to build a manufacturing plant. Plaintiff sued when defendant refused to pay. Defendant alleged that plaintiff’s work was defective. Insurance company, Westfield (which I don’t think is an insurance company willing to fight for its insured anyway), refused to provide the plaintiff with coverage.
The issue was a novel one in Ohio: whether defective-construction claims are covered by a commercial general liability policy. A federal district court in Ohio found that insurance covered defective construction generally, but that an exclusion applied.
On appeal, the 6th Circuit asked the Ohio Supreme Court: “(1) Are claims of defective construction/workmanship brought by a property owner claims for ‘property damage’ caused by an ‘occurrence’ under a commercial general liability policy?, and “(2) If such claims are considered ‘property damage’ caused by an ‘occurrence,’ does the contractual liability exclusion in the commercial general liability policy preclude coverage for claims for defective construction/workmanship?”
The Ohio Supreme Court held that claims for faulty workmanship are not fortuitous in a CGL policy. Specifically, the Ohio high court ruled that there is no coverage for the plaintiff for its alleged defective construction of and workmanship.
This is an interesting case for students – literally and figuratively – of insurance law. You can find the full opinion in Westfield Insurance v. Custom Agri Systems here.