Publications + Presentations

Summary

• Long-Term Impact: Ohio is in the minority of states that restrict Insurance coverage for damage caused by defective work. Owners, Contractors and subs have means though to restore this coverage and mitigate the risks.
• Bonding Requirements: For Owners, bonds cover defective work, offering additional security for when insurance falls short.
• Bottom Line:
  • Ohio's CGL Policy: Not a safety net for subcontractor mistakes without the right riders.
  • Action Steps: Secure endorsements, tighten contracts, and improve oversight.
  • Owners: Update bid specs to require necessary riders.
  • GCs and Subs: Work with insurance agents to maximize coverage.
  • Effort Justification: Avoiding unnecessary financial hits is worth the extra effort.

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As the weather and economy heat up, so does construction. Let’s explore two pivotal Ohio Supreme Court decisions that have reshaped insurance for construction projects in the state: Westfield Insurance Co. v. Custom Agri Systems, Inc. (2012) and Ohio Northern University v. Charles Construction Services, Inc. (2018) and what they mean today for you. These rulings impact how Ohio construction professionals manage risk, secure coverage, and protect their bottom line.

What Happened in These Cases?

First, rewind to 2012 with Westfield v. Custom Agri. Custom Agri Systems. A contractor built a steel grain bin that failed due to poor workmanship, causing property damage. They filed a claim under their Commercial General Liability (CGL) policy with Westfield. By the time the Ohio Supreme Court weighed in, Custom Agri had vanished, leaving Westfield to argue against coverage. The court ruled “No coverage.” Why? Because it said, the damage wasn’t an “accident”—something unexpected. Shoddy construction, they said, is a foreseeable business risk, not an insurable event.

Translation: if your work fails due to poor quality and damages other work or property in the process, you’re on your own.

Fast forward to 2018 with Ohio Northern University v. Charles Construction. Charles Construction, a general contractor, worked on a university hotel project. After completion, water leaks and structural issues emerged, all blamed on subcontractors’ work. Charles had a CGL policy with Cincinnati Insurance that included a products-completed operations hazard (PCOH) coverage, expecting coverage for post-completion damages. Wrong again. The Supreme Court held firm: damage resulting from faulty subcontractor work isn’t an “occurrence,” even with PCOH. The Ohio Supreme Court said the damage was tied to predictable risks, not an accident. No coverage.

What Does This Mean for You?

These rulings create a unique insurance landscape for Ohio construction projects. In simple terms, the "Your Work" exclusion in a CGL insurance policy says that the insurance won’t cover damage to your own work if it’s defective. So, if you’re a contractor and you mess up something you built—like a wall that collapses because you didn’t build it right—the insurance won’t pay to fix it. That’s on you.

The "subcontractor exception" is a twist to this rule. It is a standard clause that is interpreted in most states as meaning if you hire a subcontractor to do part of the job and their work turns out faulty—like they install a leaky roof that ruins the ceiling—you might still be covered under your insurance policy for the damage their mistake causes. In the vast majority of states (but not Ohio, thanks to these court rulings), this exception lets your insurance kick in to cover the cost of fixing or replacing what the subcontractor screwed up, even though it’s technically part of "your work" as the general contractor overseeing the project.

So, bottom line: the subcontractor exception is a lifeline  that can cover significant costs that arise when  a sub’s bad work causes trouble—except in Ohio (and a small number of other states), where the courts have basically said, “Nope, that’s still your problem.”

Here’s the fallout:

1. Your Standard CGL Policy Might Not Cover Subcontractor Mistakes: Pre-rulings, many assumed CGL policies covered damages arising out of subcontractor errors. In Ohio, that’s flipped—coverage requires a truly unexpected event, not just poor craftsmanship. This leaves general contractors (GCs), owners, and subcontractors exposed.
2. More Financial Risk: GCs, you’re on the hook for the whole project. If a sub’s mistake causes damage, your CGL won’t help. In Ohio Northern, the university’s $6 million fix landed on Charles Construction—no insurance cushion. That’s a cash-flow killer.
3. Pressure on Subcontractors: If the GC’s insurance won’t cover your work’s fallout, they’ll pursue you via indemnity claims or lawsuits. Your own CGL won’t cover defective work either, increasing your exposure.
4. Owners’ Dilemma: Owners rely on contractors’ insurance as a safety net to cover property damage that is a fallout of faulty work. Without it, they may demand performance bonds, tighter contracts, or holdbacks to avoid being left high and dry.

In short, these rulings shrank Ohio’s insurance umbrella for construction defects. Most states view subcontractor mistakes as covered “accidents,” but in Ohio, it appears they’re uninsurable business risks.

Have Other Cases Changed This?

Since 2018, no major Ohio Supreme Court ruling has overturned Custom Agri or Ohio Northern. Damage caused by a subcontractor’s faulty work still isn’t an “occurrence” under a standard CGL policy.

However, lower courts and industry discussions hint at nuance. For instance, the 2022 Motorists Mutual Insurance Co. v. Ironics, Inc. case involved a defective steel product, not subcontractor work. It reinforced that CGL policies cover damage to other property—not the defective work itself. If a sub’s error causes damages beyond their scope (e.g., a bad foundation cracking an adjacent structure), coverage might apply, which is a welcome result. Lower courts have explored this, but the Supreme Court hasn’t clarified.

No legislative fix has emerged either, unlike Arkansas, which mandated CGL coverage for damage caused faulty work after a similar ruling. Ohio’s status quo holds unless lawmakers or the state Supreme Court act.

Actionable Steps to Secure Broader Coverage

You’re not helpless. Here’s how owners, GCs, and subcontractors can mitigate this gap:

Get the Right Insurance Riders or Endorsements

Many Insurers offer add-ons to bridge this gap. They call it different things but ask and look for endorsements redefining “occurrence” to include defective work: 

• Cincinnati Insurance GA 4315: Covers damage from a sub’s completed work—gold for GCs.
• Westfield CG7121: Covers unintentional property damage from a sub’s work, tailored for GCs.
• ISO CG 2294: Excludes sub work unless paired with a reversing rider—check with your broker.
• The State of Ohio Standard Requirements for Public Facility Construction requires its contractors to get a rider or endorsement with the following language (at § 10.3.3.4 of its General Conditions (CM at Risk Project): “The CGL policy shall not exclude coverage for property damage to the Work arising out of the products/ completed-operations hazard where a Subcontractor performed the damaged Work or the Work out of which the damage arises.”
  • You should expect there may be an extra cost for these  endorsements, but it’s a small price to pay  to restore coverage for damage caused by faulty work. 
• Owners, mandate these in specs. GCs and Subs get them when you have lower tiers. And Subs, confirm your GC has them—your exposure to a good amount of liability may depend on it.

Strengthen Contracts

• GCs: Add robust indemnity clauses in subcontracts—subs pay for their damages. Require them to name you as an “additional insured” with PCOH coverage. It’s not foolproof, but it’s leverage.
• Owners: Demand GCs carry endorsements like GA 4315, and consider requiring performance bonds. Unlike insurance, bonds guarantee work (not just damage caused by the faulty work) and pay to fix it when the coverage applies.  Bonds cost more (typically 1-3% of the Contract) so are a considerable expense, but especially on larger projects the security they provide may well be worth the extra cost.
• Subs: Ensure your CGL covers your work’s fallout. Add endorsements if needed and negotiate indemnity limits with GCs to cap risk. Standard forms like ConsensusDOCS and AIA limit indemnity to insurable risks, which is reasonable, so you want to maximize coverage for defect-related damages.

Lobby for Change 

The Ohio Northern court suggested legislative action, like Arkansas’s law mandating CGL coverage for faulty work. Join groups like the American Subcontractors Association, Ohio Contractors Association, or Associated General Contractors of Ohio to push for a similar fix. 

It’s long-term, but a legislative fix to  redefine “occurrence” statewide to mirror the majority position would restore coverage without the need for the extra costs and the exposure that faces unwitting owners and builders.

The Bottom Line

Custom Agri and Ohio Northern mean your standard CGL policy in Ohio isn’t the type of safety net it is in many  other states. Damage caused by subcontractor mistakes won’t get coverage without the right riders, shifting risk onto all project participants.

But you can act.

Smart endorsements, tighter contracts, and better oversight can plug the gaps. Meet with your insurance agent, review policies, and secure those riders and endorsements. Owners, update bid specs to require them. GCs and Subs, protect yourself too—work with your agent to maximize coverage.

It’s extra effort but if you can avoid a multi-million-dollar hit, it’s worth it.