Archive for December 2012

No Damage To Other Property- No Coverage

December 4, 2012

Lagestree-Mulder, Inc. (“LMI”) was hired to construct a multi-story building. LMI hired a subcontractor for the supply and installation of the building’s windows and doors. As required by the subcontract, the subcontractor purchased a commercial general liability policy from Consolidated Insurance Company (“Consolidated”) and named LMI as an additional insured. The policy required Consolidated to cover sums that its insured became legally obligated to pay because of property damage, caused by an occurrence, taking place within the coverage territory, during the policy period. The policy also required Consolidated to defend any suit seeking damages for covered property.

During the later stages of construction, the building experienced water infiltration at numerous locations, as well as other construction defects. Once the building owner filed suit against LMI, LMI tendered the defense of its claim to Consolidated. Consolidated denied coverage and rejected LMI’s tender of defense. LMI brought suit alleging Consolidated breached its duties, and the federal district court granted Consolidated’s cross motion for summary judgment as to Consolidated’s duty to defend. LIMI appealed.   In Lagestree-Mulder, Inc. v. Consolidated Ins. Co., 682 F.3d 1054 (7th Cir. 2012), the U.S. Court of Appeals for the Seventh Circuit, applying Illinois law, concluded that Consolidated’s duty to defend under the policy was only triggered if the underlying complaint alleged covered damages- damage to something other than the structure, i.e., the building itself.

The Seventh Circuit found that although the complaint alleged breaches in detail, specifying deficiencies in materials, workmanship, and in the building’s construction, the complaint did not allege damage to anything other than the building. Instead, the complaint exclusively alleged damage to the structure itself, which the court found was insufficient to trigger Consolidated’s duty to defend. Additionally, the water infiltration described in the complaint was not presented as the cause of unspecified property damage, but instead, the result of faulty construction. The court relied on case law affirming that the mere possibility that covered damage occurred does not trigger a duty to defend under Illinois law as well as case law affirming that the court is not obligated to recognize claims that are merely implied, as LMI asked the court to infer claims for property damage.

This Blog is made available by Laurie & Brennan, LLP for general educational purposes only. The purpose of the Blog is not to provide specific legal advice on any particular matter. By using this Blog site you understand that there is no attorney client relationship between you and this firm and the authors or members of the firm. This Blog should not be used as a substitute for competent legal advice from a licensed professional attorney in your state. Under rules applicable to the professional conduct of attorneys in various jurisdictions, the material on this Blog may be considered advertising material.

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Ohio Supreme Court Finds Defective Construction is Not an Occurrence

December 4, 2012

In the recent case, Westfield Ins. Co. v. Custom Agri Sys., Inc., the Ohio Supreme Court determined that a claim of defective construction or workmanship brought by a property owner was an “occurrence” causing property damage under a commercial general liability policy.[1] The dispute arose when a general contractor brought suit for payment against the owner of a feed-manufacturing plant. The plant owner filed a counterclaim against the subcontractor for defective construction of a steel bin. Consequently, the general contractor brought suit against the subcontractor, alleging defective construction and damages resulting from the defective steel grain bin. When the subcontractor tendered its defense to its general liability insurer, Westfield, Westfield declared it had no duty to defend under the terms of its CGL policy with the subcontractor. Westfield argued that none of the “property damage” was caused by an “occurrence” and therefore, none of the claims were covered under the CGL policy.

The Ohio Supreme Court found two certified questions: (1) are claims of defective construction or workmanship brought by a property owner claims for “property damage” caused by an “occurrence” under a CGL policy, and (2) if such claims are considered “property damage” caused by an “occurrence,” does the contractual general liability policy preclude coverage for claims for defective construction or workmanship. The court examined the CGL’s definition of “occurrence” which is defined as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” The court found that although “accident” is not defined in the policy, the “fortuity principle” is inherent in the meaning of “accident,” and concluded that claims for faulty workmanship, such as the one in the present case, are not fortuitous in the context of a CGL policy like the one here.  The Court stated that in keeping with the spirit of fortuity that is fundamental to insurance coverage, the CGL policy does not provide coverage to Custom for its alleged defective construction of and workmanship on the steel grain bin. The Court further stated their holding is consistent with the majority of Ohio courts that have denied coverage for this type of claim, explaining the majority view is that claims of defective construction or workmanship are not claims for “property damage” caused by an “occurrence” under a CGL policy. Based on its ruling on the first certified question, the Ohio Supreme Court never reached the second certified question.


[1] Westfield Ins. Co. v. Custom Agri. Sys., Inc., Slip Opinion No. 2012-Ohio-4712.

This Blog is made available by Laurie & Brennan, LLP for general educational purposes only. The purpose of the Blog is not to provide specific legal advice on any particular matter. By using this Blog site you understand that there is no attorney client relationship between you and this firm and the authors or members of the firm. This Blog should not be used as a substitute for competent legal advice from a licensed professional attorney in your state. Under rules applicable to the professional conduct of attorneys in various jurisdictions, the material on this Blog may be considered advertising material.


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