Charles and Valerie Myers hired Perry Miller to build their home. Myers v. United Ohio Ins. Co., 2012 Ohio App. LEXIS 287 (Ohio Ct. App. Jan. 26, 2012). After completion of the home, Miller was again hired to construct an addition which included a full basement, staircases, bathroom, bedroom, hallway and garage.
After the addition was completed, one of the basement walls began to crack and bow. Miller began to make repairs, but eventually stopped working on the project. Other contractors were hired to make repairs, but further problems developed. A second basement wall began to bow and crack, allowing water into the basement. The wall eventually had to be replaced. Subsequently, the roof over the addition began to leak in five or six places before the drywall could be painted. The leaks caused water stains on the drywall and cause it to separate and tear. It was discovered the roof needed to be replaced.
The Myers sued Miller and his insurer, United Ohio Insurance Company. The trial court ruled that the policy did not provide coverage for faulty workmanship, but did provide coverage for consequential damages caused by repeated exposure to the elements. United Ohio conceded liability in the amount of $2,000 to repair water damage to the drywall. United Ohio was also found liable for $51,576, which included $31,000 to repair the roof and ceiling and $18,576 to replace the basement wall.
The appellate court vacated the trial court's judgment. The court had previously held that defective workmanship did not constitue an accident or occurrence under a CGL policy. The evidence showed the roof was not properly constructed by Miller. The damages awarded for repair of the roof were not damages for consequential or collateral damage caused to the interior of the home, but rather were for damage to the work product itself caused by faulty workmanship. Thus, the damage did arise from an occurrence.
The court also reversed the award of damages for replacement of the basement wall as mold remediation. There was no evidence that replacement of the basement wall was necessary because of mold damage. Damages for mold were also expressly excluded by the policy.
Finally faulty workmanship on the roof was not an "occurrence" within the meaning of the policy.
Therefore, the cost of repairing the incompetently constructed roof were not covered.
In deciding there was no coverage for the construction defects, the court's analysis seemed backwards. The court determined there was no damage that arose from an "occurrence," but, instead, damage to the work product arose from faulty workmanship. Unless the workmanship was intentionally faulty, it seems more plausible that the defective construction arose from an "accident" or "occurrence" under the policy. Just because there was an occurrence, however, did not assure coverage. The court seemed to find that the "your work" exclusion barred coverage, not the absence of an "occurrence. Therefore, the proper analysis would be to determine there was an occurrence, and then turn to the business risk exclusions to decide whether they barred coverage.