The Buckeye State Bucks Recent Trend: Ohio Supreme Court Holds That Property Damage Caused by a Subcontractor’s Faulty Work Does Not Constitute an “Occurrence” Covered Under CGL Policies

Ohio N. Univ. v. Charles Constr. Servs., 2018 Ohio LEXIS 2375 (Oct. 9, 2018)

This post was published in the National Association of Credit Management eNews on December 20, 2018.

This case arose out of the construction of an inn and conference center at Ohio Northern University (“ONU”).  After completion of the project, ONU discovered water damage and structural defects in the work and filed suit for breach of contract against its general contractor, Charles Construction Services, Inc. (“Charles”).  Charles, in turn, sought defense and indemnity from its commercial general liability insurer, Cincinnati Insurance Company (“CIC”).  As required by ONU, Charles’s policy contained a “products-completed operations-hazard” (“PCOH”) clause and terms specifically related to work performed by subcontractors.  Under Charles’ policy, the insurance covered “property damage” only if it was caused by an “occurrence,” defined as “[a]n accident, including continuous or repeated exposure to substantially the same general harmful conditions.”  “Accident,” however, was not defined.  CIC intervened in ONU’s suit, seeking a declaratory judgment that it was not required to defend or indemnify Charles.

The trial court granted CIC summary judgment, holding that CIC had no duty to indemnify or defend Charles.  The trial court based its holding on Westfield Inc. Co. v. Custom Agri Sys., Inc., 979 N.E.2d 269, a 2012 decision in which the Ohio Supreme Court concluded that claims for faulty workmanship are not fortuitous, and therefore, not claims for “property damage” caused by an “occurrence” covered by a CGL policy. Continue reading “The Buckeye State Bucks Recent Trend: Ohio Supreme Court Holds That Property Damage Caused by a Subcontractor’s Faulty Work Does Not Constitute an “Occurrence” Covered Under CGL Policies”

Ohio Court of Appeals Rules That Architect’s Authority Does Not Extend to Advancing Payments to Subcontractors, and Architect’s Liability Does Not Extend to Guaranteeing Subcontractors’ Work

Manley Architecture Grp., LLC, v. Santanello, 2018 Ohio App. LEXIS 2372 (June 7, 2018)

Dr. Steven A. Santanello (“Santanello”) contracted with Manley Architecture Group, LLC (“MAG”) to design and manage the construction of a large home, riding barn, pond, tennis court and outdoor pool.  Santanello acted as his own general contractor.

During construction, problems arose with the barn roof, and Santanello stopped paying MAG’s and his subcontractors’ invoices.   MAG advanced $55,557.68 to Santanello’s subcontractors to induce them to complete the project.  MAG later filed a breach of contract action against Santanello seeking to recover these advances.

Santanello filed a counterclaim for breach of contract, alleging that MAG breached its obligation to properly manage the construction of the barn, ultimately necessitating the replacement of the roof.  After a bench trial, the trial court found that both parties had breached the contract.  The parties cross-appealed. Continue reading “Ohio Court of Appeals Rules That Architect’s Authority Does Not Extend to Advancing Payments to Subcontractors, and Architect’s Liability Does Not Extend to Guaranteeing Subcontractors’ Work”

Connecticut Appellate Court Holds That Owner’s Loss in Arbitration to General Contractor on Claims of Defective Work Operates as Res Judicata to Bar Owner’s Claim Against Subcontractors Who Were Not Parties to the Arbitration

Girolametti v. Michael Horton Assoc., 2017 Conn. App. Lexis 228 (June 6, 2017)

A General Contractor brought claims for unpaid added work, via mandatory arbitration, against a building owner who asserted defective work claims in response.  The Owner abandoned the arbitration mid-process after a partial presentation of its claims.  The arbitrator ruled in favor of the General Contractor, awarding $508,597 in damages, which was affirmed by the Superior Court and Appellate Court.  The Owner then attempted to bring the same defective work claims in state court against the General Contractor, its subcontractors, and the Owner’s testing company on the project.  The defendants all filed motions for summary judgment asserting the defenses of collateral estoppel and res judicata.

The trial court granted the General Contractor’s motion but denied the subcontractors’ and testing company’s motions on the basis that both collateral estoppel and res judicata required privity between those entities and the General Contractor.

The Court of Appeals discussed each motion in detail.  As to the Owner’s claims against the General Contractor, the Court found that the Owner’s complaint involved the same claims of design and installation defects as had been raised or could have been raised in the arbitration.  The Owner had a full and fair opportunity to present his claims against the General Contractor in arbitration.  Thus, the trial court’s grant of summary judgment was affirmed on the basis of res judicata. Continue reading “Connecticut Appellate Court Holds That Owner’s Loss in Arbitration to General Contractor on Claims of Defective Work Operates as Res Judicata to Bar Owner’s Claim Against Subcontractors Who Were Not Parties to the Arbitration”