Construction companies often face claims for injuries arising from defective or faulty workmanship by themselves or their subcontractors. The company will generally submit the claim to its insurance company. Often, the insurance company denies these claims. If the damage is great, insured contractors may decide to litigate the denial of coverage. A good lawyer can often find coverage after an insurance company has denied the claim.
A recent article on insurance coverage issues found that courts across the country are split on the issue of whether a Commercial General Liability (CGL) policy “covers damages caused by a contractor’s or subcontractor’s defective workmanship.” The battle over coverage is not resolved, but two recent cases suggest that courts in Ohio and Kentucky are favoring coverage for faulty work.
In Cincinnati Insurance Company v. G.L.H., Inc. the Ohio Court of Appeals analyzed a situation where a condominium developer contested the insurance company’s denial of coverage. Although the insured was not a contractor, the policy analysis is, in part, applicable. The Court found that a “your work” exclusion in a developer’s CGL policy did not bar coverage where the exclusion did not apply to work performed by a subcontractor. Ohio and Kentucky courts interpret policies in a manner to provide coverage – this is strong policy in both states. Courts want to find coverage.
Here, the Court found that where a CGL policy insuring a developer/builder “did not clearly intend to exclude coverage for claims arising out of faulty workmanship” and “if the work was performed, in part, by subcontractors,” then the policy should provide coverage. The policy was subject to multiple interpretations and the court resolved the confusion in favor of finding coverage.
A Kentucky case, Bituminous Casualty Corporation v. Kenway Contracting, Inc. dealt with a situation where a contractor’s employee used a trackhoe to demolish a home when he was only to have demolished the home’s carport. The contractor admitted that he missed his appointment with his employee to instruct him about what to demolish. The contractor appeared on the scene and put his hands to his head as he saw his client’s home demolished. The Court’s description is humorous – you can only imagine!
The contractor’s insurance company denied coverage asserting that the employee’s actions were intentional and not covered. The Court found differently, reasoning that although intentional, the employee’s actions were not intended or expected, were an accident and therefore an occurrence covered by the policy. Citing Kentucky precedent, the Court stated that a CGL policy covers all risks not expressly excluded.
This case is relevant because the policy at issue applied equally to the contractor and subcontractor. The Court would have found coverage under the same facts and reasoning had a subcontractor, and not an employee, performed the work.
The lesson from these cases is that both Ohio and Kentucky favor coverage and each time an insurance company denies coverage, it would be wise to have an attorney carefully review the policy to look for an argument that might provide coverage.
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