Last October, the Ohio Supreme Court ruled unanimously in Ohio N. Univ v. Charles Constr. Servs, Inc. that a CGL policy did not cover $6 million in damages caused by a subcontractor’s faulty work. The Court said that faulty workmanship does not constitute fortuity, meaning it is not an accident and thus there is no occurrence. This is problematic, as without an occurrence, the CGL is not triggered – not even in cases of consequential damage. This creates a major gap in coverage. The Court’s opinion stated that faulty workmanship by subcontractors is a business risk because the contractor controls the process and can anticipate damage if subcontractor work is done incorrectly. Thus, since Ohio now considers all the work performed to be that of the general contractor (even if done by a sub), endorsement wording in the general contractor’s policy becomes the central point on which coverage will turn.
We greatly appreciate our strong relationships with our company partners. It is because of this strong relationship that we are raising concerns over this issue as it has created uncertainty for our member independent insurance agents and their clients. As you can imagine, this decision has caused some alarm among our members and thus we have been trying to help provide clarity about how carriers will interpret and apply this decision to their policies. Several companies have responded by sending bulletins to their agency force that provide information on their stance following this decision, thus alleviating concerns for agents and their clients about how to ensure they have the proper coverage in place in light of this ruling. The endorsements that OIA has seen from carriers that appear to appropriately address the coverage gap that now exists alter the definition of occurrence.
OIA is seeking a clear response from companies on this issue and how they plan to proceed in light of the legal decision. our members want to ensure their clients all have the proper coverage in place, and a prompt response from carriers will greatly help clarify this situation so that this can ultimately be achieved.
We look forward to working with companies on this matter and future matters in support of the independent agency channel.
Please reach out to Megan Smith at firstname.lastname@example.org to inform her of what actions your company has taken or plans to take.