CONTRACTOR LIABLE FOR COMPLETED-OPERATIONS

Commercial General Liability	Defective design
Faulty Workmanship	Products/Completed Operations

Frank and Linda Spears (Spears) noticed "sponginess," depressions and slanting, indicating the floor had sunk. This caused the walls and floor to separate in several places. These problems were observed when the Spears moved into their new home that had been constructed by Will R. Smith (Smith). Smith, a general building contractor doing business as Woodbury Builders, constructed the I-beam floor support system and subcontracted out the rest of the building. Other issues arose with the Spears’ home. The wallpaper split, the drywall cracked, the doorjambs shifted out of alignment.

Spears filed suit against Smith, Furrow Building Materials (Furrow) and Georgia-Pacific. Spears alleged that Furrow had furnished Smith with defective equipment and Georgia-Pacific had provided a defective design for the flooring system. Smith went bankrupt prior to the hearing so Spears added Auto Owners, Smith’s general liability carrier, to the suit. Spears settled with Georgia-Pacific and dismissed its claim against Furrow but continued with its case against Smith and Auto Owners.

The trial court found Auto Owners policy excluded all of the damages claimed by Spears and entered judgment in favor of Smith and his insurance company. Spears appealed.

The appellate court considered exclusion 2(j) (6) which excluded property damage to that particular part of any property that must be restored, repaired or replaced because your work 'was incorrectly performed on it. The exception on that exclusion stated that it did apply to property damage included in the products-completed operations hazard.

The court found that the final sentence to the exclusion was applicable in this case. The products-completed defined the coverage as all bodily injury and property damage occurring away from premises you own or rent and arising out of your product or your work. All of the damage arose out of Smith’s work on the floor support system. Exclusion 2(j)(5) barred coverage for work being done by a contractor for claims while the work was performed but the court said this did not apply since Smith had completed his work, and the damage caused by his defective work was not discovered until after the owners moved into the house.

The judgment entered in the trial court in favor of Smith and his insurance company was reversed, and the action was remanded for further proceedings.

Spears et al., Appellants v. Smith, d/b/a Woodbury Builders, et al. No. 15864--Court of Appeals of Ohio, Second District, Montgomery County--November 29, 1996--690 North Eastern Reporter 2d 557.