In Younglove Construction, LLC v. PSD Development, LLC, No. 3:08CV1337 (N.D. Ohio July 21, 2010), insured Custom Agri Systems, Inc. was a subcontractor to Younglove Construction for the design and construction of a steel grain bin for an animal feed manufacturing facility for which Younglove was the general contractor hired by project owner PSD. Custom Agri subcontracted portions of its work to others. After Custom Agri completed its work, PSD sued Younglove which in turn filed a third party complaint against Custom Agri for contribution and indemnity. The PSD complaint alleged in part defective construction of the steel grain bin and resulting damage to the entire facility. Custom Agri’s CGL insurer, Westfield, intervened to seek a declaratory judgment of no duty to defend or indemnity Custom Agri. On cross-motions for summary judgment, the federal district trial court, applying Ohio law, granted summary judgment for Custom Agri, holding that Westfield had a duty to defend. The court held in turn:
(1) while it is undecided under Ohio law whether defective construction, by itself, constitutes “property damage” caused by an “occurrence,” property damage resulting from defective construction, as alleged here by PSD, does constitute “property damage” caused by an “occurrence”;
(2) the contractual liability exclusion did not eliminate a defense obligation because, while it applies to breach of contract claims, it does not apply to PSD’s “implied” tort claims for consequential damages:
(3) exclusions j.(5) and j.(6) did not eliminate a defense obligation because they apply to on-going operations only and the PSD complaint alleges consequential damages occurring after Custom Agri completed it work;
(4) exclusion k. did not apply because (a) the steel grain bin, being attached to land, constituted real property and thus did not constitute “your product,” and (b) the exclusion does not apply to resulting damage;
(5) exclusion l. did not eliminate a defense obligation because (a) some of Custom Agri’s work was performed by subcontractors, and (b) the exclusion does not apply to resulting damage caused by Custom Agri’s own work;
(6) exclusion m. (impaired property) did not eliminate a duty to defend because (a) PSD’s complaint alleged physical injury to tangible property, (b) the exclusion does not apply to resulting damage, and (c) some of the alleged property damage may fall within the “sudden and accidental” exception; and
(7) the professional services exclusion did not eliminate a defense obligation because, while it may apply to property damage arising from Custom Agri’s design of the grain bin, it would not apply to Custom Agri’s construction of the bin.