Supreme Court rules CGL does not cover subcontractor’s faulty work

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The Ohio Supreme Court recently ruled unanimously in Ohio N. Univ v. Charles Constr. Servs, Inc. that a CGL policy does not cover $6 million in damages caused by a subcontractor’s faulty work.


Charles Construction Services was hired to work on The University Inn and Conference Center at Ohio Northern.

Shortly after opening, extensive water damage was found that was believed to be caused by the contractor and their subcontractors’ work, in addition to other serious defects that cost the university nearly $6 million in repairs.


Charles Construction purchased a CGL policy from Cincinnati Insurance Company.

That policy was required to include “products-completed operations hazard” (PCOH) coverage, which covers damages “arising out of completed operations,” and has terms that specifically apply to the work performed by subcontractors. The policy had a maximum payout of $2 million each for both the CGL and the PCOH.


In 2012, Ohio Northern sued Charles Construction in common pleas court for breach of contract and other claims related to the damaged inn.

Charles Construction added several of its subcontractors to the lawsuit and filed a claim with Cincinnati Insurance to have the insurance company provide its legal defense and to pay any damages awarded to the university. Cincinnati Insurance stated it would defend Charles, but reserved the right to argue that the CGL policy did not cover the university’s claim.

Their argument was based on a 2012 decision in Westfield Ins. Co. v. Custom Agri Systems in which the Ohio Supreme Court ruled that a claim of defective construction or workmanship isn’t a claim for ‘property damage’ caused by an ‘occurrence’ as defined by an industry-standard CGL. In 2015, the trial court found that Cincinnati Insurance neither had to defend the contractor nor pay for the damages.

The case was appealed by Ohio Northern and Charles Construction, and the appeals court reversed the lower court’s ruling.

They held that the policy is ambiguous as to whether property damage caused by a subcontractor’s faulty workmanship constitutes an occurrence, and if not, whether it was covered under exceptions in the policy. The court found coverage for “defective workmanship by a subcontractor” under the products-completed clause of the contract.

Cincinnati Insurance appealed the case to the Ohio Supreme Court.

Ohio Supreme Court’s Findings

As noted, the Court previously ruled in Westfield Ins. Co. v. Custom Agri Systems in 2012 that an insurance claim filed by a contractor under a CGL policy for property damages caused by its own faulty workmanship is not an “occurrence” that is covered by the policy.

Ohio N. Univ v. Charles Constr. Servs, Inc. is nearly identical to the 2012 case except that it questions whether the CGL policy covers damage caused by the subcontractor’s work.

Ultimately, in a unanimous decision, the court found that it does not, as the plain and ordinary meaning of the words in the Charles Construction CGL policy do not expressly state that faulty workmanship by subcontractors is an “occurrence.”

The Court’s opinion stated the construction industry has added the PCOH policies to guard against subcontractor damage; however, to trigger the coverage for damages, an “occurrence” must happen. The opinion explains that an “occurrence” means an accident, and faulty work is not an accident, but rather a “business risk”.

For more details on this case, click here.

Also see: Ohio Supreme Court Case Questions Coverage For Faulty Workmanship

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