Summary
The Supreme Court of Ohio held that property damage caused by a subcontractor’s faulty workmanship is not caused by an “occurrence” under the commercial general liability policy at issue because the damage is not fortuitous. The insurer therefore had no duty to defend or indemnify the general contractor, notwithstanding the policy’s products-completed-operations-hazard provision and subcontractor-specific language. The court reversed the appellate judgment and reinstated the trial court’s judgment.
Topics
Practice areas
Questions Presented
- Whether property damage caused by a subcontractor's faulty workmanship constitutes an 'occurrence' under the CGL policy.
- Whether the policy's products-completed-operations-hazard clause and subcontractor-specific provisions create coverage despite the absence of an occurrence.
- Whether Cincinnati Insurance Company had a duty to defend or indemnify Charles Construction against ONU's construction-defect claims.
Holdings
- Property damage caused by a subcontractor's faulty work is not fortuitous and therefore does not constitute an 'occurrence' under the CGL policy.
- The products-completed-operations-hazard and subcontractor-specific provisions do not independently create coverage when the threshold requirement that property damage be caused by an occurrence is not satisfied.
- Cincinnati Insurance Company was not required to defend Charles Construction against ONU's lawsuit or indemnify it against damages caused by the subcontractor's faulty work.
Key quotations
“Property damage caused by a subcontractor’s faulty work is not an “occurrence” under a CGL policy because it cannot be deemed fortuitous.” (¶ 3)
“A CGL policy is not intended to insure business risks that are the normal, frequent, or predictable consequences of doing business and which businesses can control and manage.” (¶ 14)
“Here, we similarly hold that a subcontractor’s faulty work does not meet the definition of an “occurrence” because it is not based in fortuity.” (¶ 27)
Factual background
Ohio Northern University contracted with Charles Construction Services, Inc. to build a hotel and conference center. Charles Construction obtained a commercial general liability policy from Cincinnati Insurance Company containing products-completed-operations-hazard and subcontractor-related provisions. After completion, ONU discovered extensive water damage and structural defects allegedly caused by defective work of Charles Construction and its subcontractors, with estimated repair costs of approximately $6 million. Charles Construction sought a defense and indemnity from Cincinnati.
Procedural history
Ohio Northern University sued Charles Construction in the Hancock County Common Pleas Court for breach of contract and other claims arising from water damage and structural defects in a hotel constructed by Charles Construction and its subcontractors. Cincinnati Insurance intervened and sought a declaratory judgment that its CGL policy provided no defense or indemnity. The trial court granted Cincinnati summary judgment, but the Third District reversed, holding that the policy was ambiguous regarding subcontractor-caused defective work. The Supreme Court of Ohio reversed the appellate court and reinstated the trial court's judgment.
Remand instructions
The court reversed the judgment of the court of appeals and reinstated the trial court's judgment in favor of Cincinnati Insurance Company.