In Mosser Construction, Inc. v. Travelers Indem. Co., No. 09-4449 (6th Cir. July 14, 2011)(unpublished), claimant project owner Port Clinton contracted with insured general contractor Mosser for the construction of a building. Following completion, Port Clinton sued Mosser for breach of contract seeking damages because of physical injury to the project occurring after completion resulting from defective backfill material that settled improperly. Mosser’s CGL insurer Travelers denied a defense and Mosser filed suit against Travelers seeking a declaratory judgment. Mosser and Travelers filed cross-motions for summary judgment on the issue of whether the supplier of the backfill material–Gerken–qualified as a subcontractor for purposes of the subcontractor work exception to the “your work” exclusion–exclusion l.–for property damage to or arising out of Mosser’s completed work. Mosser had purchased the backfill material from Gerken pursuant to a purchase order specifying that Gerken was to supply Mosser with an industry standard grade of backfill for use in the Port Clinton project. Gerken regularly manufactured the specified backfill material and maintained an inventory of the material at a local facility from which Mosser picked up the backfill to take to the job site. The federal district trial court granted summary judgment for Travelers, finding that the subcontractor work exception to the “your work” exclusion did not apply because Gerken did not qualify as a subcontractor. On appeal, the Sixth Circuit reversed, holding that Travelers had a duty to defend Mosser against the Port Clinton complaint. Applying Ohio law, the court determined that, because of competing reasonable definitions from dictionaries and case law, where used undefined in the “your work” exclusion, “subcontractor” was ambiguous. The court adopted the following definition:
For a material supplier who does not perform work at the site to be a subcontractor, the supplier must manufacture the material according to specifications supplied by the general contractor, and, its materials contract with the general contractor must explicitly incorporate terms from the master contract or otherwise explicitly indicate that the materials at issue are manufactured or supplied specifically for the master contract’s project.
Applying this definition, noting in particular that Gerken manufactured the backfill at its own facility using its own equipment, and the purchase order identified the subject project, the court determined that “the circumstances of this case are enough to nudge Gerken over the line separating mere material suppliers from subcontractors.”