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ASA Urges Supreme Court of Ohio to Affirm Appeals Court Decision in CGL Insurance Case

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American Subcontractors Association, Inc.
1004 Duke St., Alexandria, VA 22314-3588 • www.asaonline.comwww.subexcel.com
 

NEWS RELEASE
FOR RELEASE April 12, 2018
Contact: Marc Ramsey, (703) 684-3450, Ext. 1321, mramsey@asa-hq.com


ASA Urges Supreme Court of Ohio to Affirm Appeals Court Decision in Ohio Northern University CGL Insurance Case

ASA, AGC of Ohio and Ohio Contractors Association Also Seek Clarification of Earlier Case Decision That Defective Construction Was Not an ‘Occurrence’

ALEXANDRIA, Va.—The American Subcontractors Association, Associated General Contractors of Ohio, and Ohio Contractors Association asked the Supreme Court of Ohio to affirm an appeals court decision in a commercial general liability (CGL) insurance case that otherwise could have tremendous negative ramifications for subcontractors in Ohio and beyond.

In an amicus, or “friend-of-the-court,” brief filed in Ohio Northern University v. Charles Construction Services, Inc., and The Cincinnati Insurance Company, ASA, AGC of Ohio and OCA emphasized that “their members have an interest in seeing that the language in commercial general liability policies be given its plain and ordinary meaning, without resorting to the use of judicial interpretation in attempts to alter that plain meaning.”

“It is the custom and practice in the construction industry to rely upon the coverage provided by the plain language of commercial general liability policies for defective workmanship by a subcontractor,” the amici curiae said.

In the underlying case, Ohio Northern University contracted in 2008 with Charles Construction Services to build a new luxury hotel and conference center on the ONU campus, and most of the project construction work was performed by subcontractors to Charles Construction. In 2011, after construction was complete, ONU discovered evidence of water intrusion and moisture damage to numerous areas of the building. While remediating the problems, ONU discovered serious structural defects which greatly broadened the scope of the remedial work and required completely removing and replacing the brick and masonry façade. ONU sued Charles Construction, who brought in many of its subcontractors.

Charles Construction’s CGL carrier, The Cincinnati Insurance Company, moved for Summary Judgment, citing an earlier case, Westfield Ins. Co. v. Custom Agri Systems, Inc., arguing that Charles Construction’s CGL policy did not provide coverage with respect to any of the damages or claims, and therefore owed no duty to defend and indemnify Charles Construction against ONU’s claims. Cincinnati Insurance grounded its arguments in the Supreme Court of Ohio’s proclamation in Custom Agri that “claims of defective construction or workmanship brought by a property owner are not claims for ‘property damage’ caused by an ‘occurrence’ under a commercial general liability policy.”

ONU and Charles Construction countered that Custom Agri was not as broad as Cincinnati Insurance claimed and was distinguishable because the “products-completed operations hazard” portion of Charles Construction’s CGL policy applied and that while the “your work” exclusion would exclude coverage for occurrence damages arising out of work performed by Charles Construction, the “subcontractor exception” to the “your work” exclusion would bring the damages in this case within the scope of coverage, as the damages were due to the allegedly defective work of subcontractors of the primary insured.

The trial court agreed with Cincinnati Insurance, finding that Custom Agri specifically applied and not only was there no coverage, the insurer did not even have a duty to defend the claim, because defective construction was not an occurrence under a CGL policy. ONU, claiming the benefits of coverage as an additional insured, and Charles Construction appealed, and the Hancock County Court of Appeals, Third Appellate District, reversed. The appeals court explicitly rejected Cincinnati Insurance’s position that Custom Agri established that “all property damage” regardless of who performed it can as a matter of law never constitute an “occurrence.” Further, the appeals court noted that its decision was consistent with the trend of many other jurisdictions—many of which involved cases in states where ASA has filed “friend-of-the-court” briefs—in addressing disputes with the same question.

In the brief, the amici curiae, arguing that Custom Agri should be overruled, told the Ohio high court, “The [Custom Agri] decision was wrongly decided, defies practical workability, and no undue hardship would occur from abandoning the precedent,” adding, “Ultimately, the Custom Agri holding is inconsistent with the law of other states considering identical policies, and it is inconsistent with Ohio law, as the general holding renders superfluous existing coverage in the CGL policy.”

The amici curiae concluded, “The primary argument relied upon by [Cincinnati Insurance] is the broad holding in Custom Agri. However … Custom Agri was not fully briefed by adverse parties. A full review of the law interpreting this universal CGL policy shows that Custom Agri was wrongly decided. It also defies practical workability because it is in opposition to the law of numerous other states, and ultimately, would not work a hardship if it were reversed. …The holding in Custom Agri should be completely reversed.”

Terry W. Posey Jr. of Thompson Hine, LLP, Miamisburg, Ohio, prepared the brief for ASA, AGC of Ohio, and OCA. ASA’s Subcontractors Legal Defense Fund financed the brief. Contributions to the SLDF may be made online.

Founded in 1966, ASA amplifies the voice of, and leads, trade contractors to improve the business environment for the construction industry and to serve as a steward for the community. The ideals and beliefs of ASA are ethical and equitable business practices, quality construction, a safe and healthy work environment, and integrity and membership diversity.

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