In Mosser Constr. Inc. v. Travelers Indem. Co., Civil Action No. 3:08CV2363 (N.D. Ohio Oct. 26, 2009) (Zouhary, J.), an Ohio District Court was confronted with the question of whether a company that supplied crushed stone backfill to a general contractor is a “subcontractor” within the meaning of the insurance policy, or merely a “material supplier.” In granting the Insured’s motion for summary judgment, the Court held that the provider of crushed stone was not a “subcontractor” within the exception to the “your work” exclusion.

The General Contractor was retained by the City of Port Clinton, Ohio (“City”) to build a wastewater treatment facility. When cracks began to form in the completed facility, the City sued the General Contractor for damages. It was determined that the source of the cracks was defective structural backfill beneath and around the foundation of the building that was supplied to the General Contractor. The General Contractor’s insurer declined to defend or indemnify it relying on the “Your Work” exclusion within the policy, which excluded property damage arising out of the General Contractor’s own work. The “Your Work” exclusion, however, contained an exception for work performed on the General Contractor’s behalf by a subcontractor. The policy did not define subcontractor. The General Contractor maintained that the supplier of the backfill was a subcontractor and, therefore, fell within the exception to the “Your Work” exclusion. The Insurer contended that it was a material supplier and that the exception to the exclusion did not apply.

The Court looked to federal cases interpreting the Miller Act (the “Act”), 40 U.S.C. § 3131, which protects those who have a contractual agreement with the prime contractor or a subcontractor on a federal project. The Act does not protect those supplying labor or materials to a material supplier. The Court examined factors indicative of a subcontractor relationship and a material supplier relationship. Guided by these factors, the Court found that the backfill supplier was a “material supplier,” and, as such, outside the exception to the “Your Work” exclusion.

Because the Court concluded that the Insurer had no duty to defend, the Court held that it would not be liable for bad faith.

For a complete copy of the opinion, please click here.