A federal appeals court reversed a lower court and held that a subcontractor’s policy required an insurer to defend or indemnify the contractor.

In 2012, Canton, Georgia-based CSC General Contractors Inc. contracted to build a store, including a parking lot, for an electric tools company and subcontracted the parking lot’s construction to Canton-based Glosson Group LLC, according to Wednesday’s ruling by the 8th U.S. Circuit Court of Appeals in St. Louis in Selective Way Insurance Co. v. CSC General Contractors, Inc. et al.

The subcontract required that CSC be an additional insured under Glosson’s general liability policy, which was with Selective Way Insurance Co., a unit of Branchville, New Jersey-based Selective Insurance Group Inc.

In 2014, the electric tools company inspected the parking lot and reported scaling, cracking and “pop outs,” which occur when small portions of the surface mortar break away from the concrete flatwork, according to the ruling.  The company sued CSC in 2015, which was later settled.

Selective denied coverage on the ground it was not an additional insured, and that Glosson had no duty to defend or indemnify. CSC filed a third-party complaint against Glosson, asserting it caused the damage by adding too much water to the concrete.

The complaint went to arbitration and in 2017, the arbitrator determined Glosson owed CSC indemnification for all the company’s damages.

Selective then filed suit in U.S. District Court in Fargo, North Dakota, which ruled that Selective did not owe a duty to defend and indemnify CSC, although it held that CSC was an additional insured.

The ruling was overturned by a unanimous three-judge appeals court panel. Selective asserts it is not an additional insured because Glosson did not handle a “product” but only constructed “real property,” the appeals court ruling said.

“Cement is a product that Glosson handled. Thus, the property damage caused, at least in part, by the cement Glosson mixed is covered under the policy,” said the ruling, which also held the district court had erred in focusing on coverage issues that went beyond the denial letter in its ruling. The case was remanded for further proceedings.  

Attorneys in the case did not respond to requests for comment.