Westfield Insurance v. Custom Agri Systems, Inc.
979 N.E.2d 269
Ohio2012Background
- Younglove Construction, L.L.C. contracted with PSD Development, L.L.C. to build a feed-manufacturing plant in Sandusky, Ohio; PSD withheld payment, prompting a breach-of-contract suit by Younglove.
- Custom Agri Systems, Inc. built the steel grain bin at issue as a subcontractor; Younglove filed third-party claims against Custom for contribution and indemnity.
- Custom and its insurer Westfield Insurance Company contested coverage under Westfield’s CGL policy, arguing no property damage caused by an occurrence, or that exclusions apply.
- The district court assumed coverage for defective construction and granted Westfield summary judgment after reconsideration, prompting Custom to appeal.
- The Sixth Circuit certified two state-law questions to the Ohio Supreme Court due to a lack of controlling Ohio precedent on defective-construction claims under CGL policies.
- The court answered the first question in the negative, holding defective construction/workmanship claims are not property damage caused by an occurrence under a CGL policy; the second question was deemed moot.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Are defective construction claims property damage caused by an occurrence under a CGL policy? | Younglove/Custom argued such claims are covered as property damage from an occurrence. | Westfield/Custom argued no occurrence, or that exclusions apply, excluding coverage. | No coverage: defective construction claims are not property damage caused by an occurrence. |
| Is the contractual-liability exclusion moot after answering the first question? | Moot; second question unnecessary to answer. |
Key Cases Cited
- Bogner Constr. Co. v. Field & Assocs., 2009-Ohio-116 (5th Dist. 2009) (no coverage for defective workmanship under CGL when no accident/occurrence)
- Paramount Parks, Inc. v. Admiral Ins. Co., 2008-Ohio-1351 (12th Dist. 2008) (CGL does not insure defective or negligent workmanship absent fortuity)
- Westfield Ins. Co. v. Coastal Group, Inc., 2006-Ohio-153 (9th Dist. 2006) (defects in workmanship generally excluded as business risks)
- Heile v. Herrmann, 136 Ohio App.3d 351 (1st Dist. 1999) (faulty workmanship typically not fortuitous under CGL)
- Erie Ins. Exchange v. Colony Dev. Corp., 136 Ohio App.3d 406 (8th Dist. 2000) (work-product exclusions acknowledged; coverage analysis separate from damage type)
- Hybud Equip. Corp. v. Sphere Drake Ins. Co., 64 Ohio St.3d 657 (1992) (definition of accidental/occurrence includes fortuity and lack of intentionality)
- Rothman v. Metro. Cas. Ins. Co., 134 Ohio St. 241 (1938) (accident includes unexpected/harmful events absent intentionality)
- Zanco, Inc. v. Michigan Mut. Ins. Co., 11 Ohio St.3d 114 (1984) (examines initial coverage versus exclusions in CGL policy)