Last month, the Ohio Supreme Court answered a question certified to it by the US Sixth Circuit Court of Appeals regarding contractor liability insurance. The question posed: Whether a claim for defective construction or workmanship constitutes a “property damage occurrence” under a commercial general liability insurance policy. The answer: it does not, defects are not accidents.
Why does this matter for Associations? When the Board hires a contractor to complete a task, usually the Board requests to see a copy of the liability insurance. While this liability insurance may cover things such as a ladder going through a window, a tree cutting gone wrong that falls on a roof, or a worker being injured on the job, this general liability insurance will NOT cover defective workmanship (i.e. the roof leaks 6 months after replacement, a retaining wall fails 2 years later). If the Board decides to sue for a defect, the general policy will provide no relief at all. So make sure there is a specific provision for defects in workmanship or defects in the insurance policy. Westfield Ins. Co. v. Custom Agri Sys., Inc., Slip Opinion No. 2012-Ohio-4712