Legally Speaking: Construction Cases in the Courts That You Ought to Care About—and Why

January 2019 Edition

by R. Russell O’Rourke, Esq., Meyers, Roman, Friedberg & Lewis, LPA

You are from Missouri—or any other state for that matter—and you read about a construction case that has gone to court here in The Contractor’s Compass. You say to yourself, why would I possibly care about a case from Ohio, California, Texas or, again, any state other than yours? You say, show me why that case is important to me.

Truth be told, some cases are immediately important to you, others may not seem so, but have a long-term effect that could be neutral, helpful or devastating to your company and other subcontractors and suppliers in your state. You ask yourself, “How is this possible, how can a Kentucky or Arkansas case be of interest to me?”

Something like that happened this October in Ohio. There is an Ohio Supreme Court case written about in this edition, Ohio Northern University v. Charles Construction Services, Inc. This was a case of first impression with the specific issue being considered, whether the language of the Commercial General Liability policy purchased by Charles Construction covered Charles Construction for defective workmanship caused by a subcontractor under the subcontractor exception to the “Your Work” exception or would the court follow the same logic that it did in its 2012 decision in Westfield Insurance Company v. Custom Agri Systems, Inc.? In Charles, the defective construction was performed by a subcontractor. In Westfield, the defective construction was caused by the insured.

When the court published its decision in Westfield, it held that, “Claims of defective construction or workmanship brought by a property owner are not claims for ‘property damage’ caused by an ‘occurrence’ under a commercial general liability policy.” While that decision put Ohio in the minority of states that ruled on CGL claims in that way, it was after all, a claim against an insured which could be argued was not an occurrence because of the “Your Work” exception. Was Charles different? The court didn’t think so. How did the justices come to the conclusion that, “… property damage caused by a subcontractor’s faulty work is not fortuitous and does not meet the definition of an ‘occurrence’ under a CGL policy?” They didn’t even get to the subcontractor exception because in both Westfield and Charles they agreed with, “our sister court in Kentucky” and “In deciding Custom Agri, we adopted the Arkansas Supreme Court’s reasoning …”

What do the laws of Kentucky and Arkansas have to do with the laws of Ohio? Nothing. Courts look to other courts where there is “precedential value” to a case, meaning that another court decided this and we are subject to the authority of that court, so, generally, we need to follow it or determine why it is different from our case so we don’t have to. In Ohio, the Ohio Supreme Court issues rulings that have to be followed by all lower courts; courts of appeal, one step up from trial court and one step down from the Supreme Court have precedential authority over trial courts within their jurisdiction; trial court decisions have no precedential value, not even in the same court with the same judge in another case.

What if a case isn’t from a court within the jurisdiction of the court making the decision, but there is a case from another jurisdiction? While cases like that may not have precedential value, they may still be persuasive. The court may not have to follow the ruling, but it may want to do so. Perhaps the case, in the court’s eyes, is particularly well-reasoned or is so similar to the case under consideration AND there is no case which is “on point” within the jurisdiction of the court deciding the case, that they want to adopt all or part of that prior ruling.

Such a decision can have an interesting effect. In Charles, the Ohio Supreme Court noted that, “After [the Arkansas] decision, the Arkansas legislature enacted [a new statute] which states that a CGL policy offered for sale in Arkansas shall define ‘occurrence’ to include ‘[p]roperty damage * * * resulting from faulty workmanship.’ If it were so inclined, the Ohio General Assembly could take similar action in response to our opinion today.” Essentially, the Court was saying that, “this is the current state of the law in Ohio as we see it and, if the people of Ohio don’t think that it is right, then the legislature should change the law.”

The same thing can and does happen in your state, for exactly the same reason. Should you care what happens in Ohio, Kentucky or Arkansas? The answer should be a confirmed, Yes!

Which cases should you care about? Generally, ones that you may hear about from your colleagues or you read about in the local news or in industry journals that have made what you think is a bad ruling that can hurt the way you do business or that are making new law or supporting existing law that might be appealed. You want to keep “good” laws and change “bad” laws.

That is the entire point of ASA’s Subcontractor’s Legal Defense Fund—to fund amicus, “friend-of-the-court,” briefs to help the court understand not only the issues in the case, but how a decision will impact the construction subcontracting community. The SLDF searches for cases that are making rulings that are either harmful or helpful to subcontractors. If they are bad, we want to help assure that they are overturned. If they are good, we want to help assure that they are not overturned.

Read The Contractor’s Compass—I must be preaching to the choir here, since you actually are reading it—and ASAToday, paying special attention to the cases that are being discussed and especially all SLDF cases. To keep up on what the SLDF is doing and the successes ASA is achieving for you, go to ASA SLDF Cases on the new ASA Web site to read the briefs that were filed and the resulting decisions. You can read the cases by state. You will notice that some states have many more cases that the SLDF has undertaken. This is primarily because more people are noticing and reporting cases of interest to the SLDF in those states.

If you read or hear about any cases that are from your state’s courts, you should be VERY interested in those and should complete and submit an SLDF application to ASA for consideration. The SLDF, which is funded by your donations, spends thousands of dollars every year to help keep good laws and overturn bad laws for the benefit of you and the other members of the construction subcontracting industry. Remember, the SLDF has always operated completely on donations from ASA members and other interested parties—we cannot do this without you! Make a donation now to the SLDF!

Russell O’Rourke, Esq., is a partner with Meyers, Roman, Friedberg & Lewis, LPA, Cleveland, Ohio, where he serves as chair of the Construction Group. As legal counsel for The Builders Exchange and Home Builders Association, O’Rourke’s 30-plus years of active involvement in construction industry trade associations—understanding both the requirements of the law and the business savvy to successfully operate within the industry—have allowed him to serve in the roles of client and industry advisor, advocate and leader. His active engagement has also translated into driving and contributing to legislative issues for the benefit of the construction industry, recognizing the issues that are most important to his clients and advising them of various approaches and resolution options using good business judgment. O’Rourke represents contractors, subcontractors, suppliers, homebuilders and remodelers throughout all stages of the process—“cradle to grave”—bidding, contract negotiation, change orders, claims and claims avoidance, mechanics’ liens, bond claims and dispute resolution. He can be reached at (216) 831-0042, Ext. 153, or rorourke@meyersroman.com.

 

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