Sunday, December 25, 2016

The general contractor, an additional insured on the subcontractor’s policy, was not entitled to coverage for construction defect claims that arose after completion of the project. Weitz Co. v. Acuity


Additional Insured Not Entitled to Coverage for Post-Completion Defects
Posted on December 23, 2016



The general contractor, an additional insured on the subcontractor’s policy, was not entitled to coverage for construction defect claims that arose after completion of the project. Weitz Co. v. Acuity, 2016 U.S. Dist. LEXIS 150433 (S.D. Ohio Oct. 31, 2016).

Weitz was the general contractor hired by Twin Lakes for construction of a residential community. One of the subcontractors, Miter Masonry, was insured by Acuity under a CGL policy. Work on the project began in 2002 and was substantially completed in 2005. In 2011, Twin Lakes notified Weitz that there were moisture infiltration issues at the project that may be related to work during the project.

Twin Lakes filed a Demand for Arbitration against Weitz on November 30, 2012. Twin Lakes alleged that the defects included the building wrap, windows, doors, wood trim, aluminum wrap, vinyl siding, flashing and brick veneer not being installed in accordance with contract documents and/or industry standards. The arbitration panel awarded damages to Twin Lakes in the amount of $2,775,771.86. The panel found that Weitz breached sections of the contract which caused moisture intrusion and damage to all the units. The panel ultimately held that Weitz could recover from the subcontractors 100% of the $2,775,771.86 awarded. Acuity’s insured, Miter Masonry, was determined to be 4% at fault for the damages.

Weitz sued Acuity, arguing it was entitled to a defense and indemnity against the claims asserted by Twin Lakes. The policy included an “Additional Insured – Completed Operations” endorsement. The endorsement provided coverage for an additional insured for whom the insured was to perform operations. Coverage was limited, however, to liability included in the products-completed operations hazard for property damage caused by the insured’s work. The policy defined products-completed operations hazard as “all . . . property damage occurring away from premises you own or rent and arising out of your product or your work except work that has not yet been completed or abandoned.”

Weitz moved for summary judgment seeking a ruling that Acuity owed a defense in the arbitration. The motion was denied. The first time Weitz provided notice of property damage to Acuity was on June 30, 2011, several years after the project was completed. Additional insured coverage was limited for completed operations and did not apply to:


Bodily injury or property damage that occurs after the time period during which the contract or agreement described in item 1 requires you to add such person or organization onto your policy as an additional insured for completed operations . . .

Weitz’s claims for additional insured coverage failed because there was no evidence that the alleged property damage occurred within the time limit specified in the policy. In the subcontract between Weitz and Miter, the subcontractor was required to continue CGL coverage for at least two years following final payment to the Contractor in connection with the project. 


The “Additional Insured – Completed Operations” endorsement did not apply to property damage occurring after two years following final payment to the contractor in connection with the project. Final payment to Weitz was on July 31, 2005, when the project was completed. There was no evidence that the alleged property damage occurred before the expiration of the two-year period. Therefore, Weitz was not entitled to additional insured coverage, and Acuity had not duty to defend or indemnify Weitz.

The court further noted that under Ohio law, there was no allegation of property damage. The Arbitration Panel specifically found that Weitz failed to perform in a workmanlike manner. Moreover, Weitz breached its contract with Twin Lakes, causing the moisture intrusion and the resulting damage to all the units. The claims of defective workmanship brought by a property owner were not claims for “property damage” caused by an “occurrence” under Ohio law.