The Sixth Circuit affirmed the lower court's order granting summary judgment to the insurer who denied a defense for a construction defect claim. Steel Supply & Eng'g Co. v. Illinois Nat'. Ins. Co., 2015 U.S. App. LEXIS 14363 (6th Cir. Aug. 13, 2015). Steel Supply contracted with the Carmel Redevelopment Corporation to fabricate and erect steel for a construction project in Carmel, Indiana. After the steel was erected, an iron worker at the site discovered defects in the steel. Subsequent investigations revealed additional defects. Carmel filed suit against Steel Supply for breach of contract. The complaint alleged that a critical connection that Steel Supply designed was inadequate to handle the forces coming onto it. Carmel claimed that the immediate need to remediate the steel damaged Carmel directly, and that other contractors sought damages from Carmel for harm caused by the delays. Illinois National initially assumed the defense of Steel Supply, but later withdrew the defense. Supply Steel then sued Illinois National. The district court granted summary judgment to Illinois National. In applying Michigan law, the Sixth Circuit affirmed. As a general matter, mere faulty workmanship did not constitute an occurrence. Michigan courts, however, recognized an exception: even mere faulty workmanship constituted an "occurrence" if it harmed a third party's property. Steel Supply argued the exception applied here. First, it argued that photographs showed that the Steel Supply's faulty workmanship did damage property that belonged to neither Steel Supply or Carmel. Second, Carmel was suing for reimbursement for that damage by seeking fees for various professionals. Both arguments failed. Here, there was no record that a third party sought contribution from Carmel. The underlying complaint did not explicitly claim reimbursement for any specific damage to third-party property. The photographs on which Steel Supply relied upon to prove damage did not show a causal nexus between damage and Steel Supply's work.
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