Ohio N. Univ. v. Charles Constr. Servs., Inc. (Slip Opinion)
120 N.E.3d 762
Ohio2018Background
- Ohio Northern University contracted Charles Construction to build a hotel; Charles procured a commercial general liability (CGL) policy from Cincinnati Insurance Company (CIC) that included a products-completed operations hazard (PCOH) provision and subcontractor-specific terms.
- After completion, ONU discovered extensive water and structural damage allegedly caused by defective work by Charles and its subcontractors; ONU sued Charles for breach of contract and related claims.
- Charles tendered the claim to CIC, which agreed to defend under reservation of rights and then sought a declaratory judgment that it had no duty to defend or indemnify.
- The trial court granted summary judgment for CIC relying on Custom Agri; the court of appeals reversed, finding ambiguity in the PCOH and subcontractor clauses and construing ambiguity against the insurer.
- The Ohio Supreme Court granted review to decide whether property damage caused by a subcontractor’s faulty work constitutes an "occurrence" under the CGL policy and whether CIC had a duty to defend or indemnify.
Issues
| Issue | Plaintiff's Argument (ONU/Charles) | Defendant's Argument (CIC) | Held |
|---|---|---|---|
| Whether property damage from subcontractor faulty workmanship is an "occurrence" under the CGL policy | PCOH and subcontractor-specific language show parties intended coverage for subcontractor-caused post-completion defects | Faulty workmanship is not fortuitous and thus not an "occurrence" under the policy definition | Held for CIC: subcontractor faulty workmanship is not an "occurrence" because it is not fortuitous; no duty to defend or indemnify |
| Whether PCOH/subcontractor clauses alter Custom Agri’s rule and compel coverage | These provisions create coverage for completed-work damages and except subcontractor-performed work from the "your work" exclusion | Even with those clauses, coverage still requires an "occurrence"; faulty workmanship remains non-fortuitous and outside coverage | Held for CIC: PCOH/subcontractor clauses do not transform non-fortuitous defective workmanship into an "occurrence" |
Key Cases Cited
- Westfield Ins. Co. v. Custom Agri Sys., Inc., 979 N.E.2d 269 (Ohio 2012) (CGL "occurrence" requires fortuity; faulty workmanship is not an occurrence)
- Westfield Ins. Co. v. Galatis, 797 N.E.2d 1256 (Ohio 2003) (contract interpretation: give effect to parties' intent and policy language)
- Alexander v. Buckeye Pipe Line Co., 374 N.E.2d 146 (Ohio 1978) (when contract language is clear, court looks only to the writing)
- Hybud Equip. Corp. v. Sphere Drake Ins. Co., 597 N.E.2d 1096 (Ohio 1992) ("accidental" means unexpected and unintended)
- Essex Ins. Co. v. Holder, 261 S.W.3d 456 (Ark. 2008) (faulty workmanship is foreseeable, not accidental; no coverage)