An employee of a contractor died due a trench collapse during installation of a sewer line. His wife filed a wrongful death action against the project engineer, alleging that the firm overseeing the project owed a duty to the worker to perform its professional services in accordance with appropriate standards and acted negligently by failing to take steps to ensure the trench’s structural integrity. The engineer sought insurance coverage and defense under its commercial general liability (CGL) policy. The CGL carrier brought a declaratory judgment action asking the court to declare it owed no duty to the engineer because the professional liability exclusion of the policy was a complete bar to the plaintiff’s complaint. In the trial court, summary judgment was granted on the basis that the engineer’s actions were intentional rather than accidental and there was consequently no “occurrence” as defined by the CGL policy that could trigger coverage. On appeal, the U.S. Court of Appeals of the Fifth Circuit affirmed the decision but focused exclusively on the clear and unambiguous professional services exclusion to the policy – finding that the exclusion applied to the complaint that contained allegations entirely based upon professional services and professional negligence.
Facts and Allegations
In this case, a mother of a deceased worker (“Plaintiff”) who died as a result of injuries caused by a collapsed trench filed suit against Brown and Mitchell, Inc. (“BMI”), alleging it was responsible for the collapse by virtue of not taking steps to ensure its structural integrity. The accident occurred on-site while a BMI representative asked the Plaintiff to assist him in measuring a pipe to determine payment. The Plaintiff alleged that BMI had a duty to “perform its professional responsibilities as engineers in accordance with the appropriate standards. BMI acted negligently … in the performance of its responsibilities….” (emphasis in original)
QBE Insurance Corp., BMI’s excess commercial general liability (CGL) insurer, filed a separate declaratory judgment action to determine whether it was liable to pay the costs of defending BMI and to indemnify BMI for any judgment rendered against. The CGL policy contained two provisions that QBE argued insulated it from liability.
First, the policy provided for coverage caused by an “occurrence,” which is defined in the policy as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” Second, the policy contained a provision that excluded coverage for bodily injury or property damage “due to the rendering or failure to render any professional service.” The phrase “professional service” as stated in the policy included engineering, supervisory or inspection services.
The trial court judge ruled on summary judgment that BMI had no coverage under the CGL policy because the complaint alleged only intentional conduct. Since the policy only covered actions that are accidental, BMI was unable to recover. The trial court did not reach the merits of whether the professional services exclusion shielded QBE from liability.
Applying the Eight Corners Test (4 corners of the Complaint + 4 corners of Policy)
Whether an insurer is responsible to defend a lawsuit is determined by comparing the policy language to the allegations in the complaint. That analysis is referred to by the appellate court here as the “eight-corners test”. This means that the court considered the four corners of the complaint plus the four corners of the insurance policy. The insurer has a duty to defend its insured only if the wording in the complaint states a claim within the scope of coverage provided in the policy. In affirming the trial judge’s decision, the appellate court didn’t state whether it agreed with the judge’s analysis of intentional and accidental conduct, but instead focused its decision on the question of whether the professional services exclusion of the policy was applicable to bar coverage for the allegations in the complaint.
Professional Services Exclusion
In focusing on the question of “professional services” the court explained that Mississippi courts have defined a professional service as a service that “involves the application of a special skill, knowledge and education arising out of a vocation, calling, occupation or employment.”
The Court determined that while the actions of BMI at the time of the accident did not necessarily require the “application of special skill, knowledge or education,” the professional services exclusion nonetheless applied because the alleged duties of the engineer to ensure the trench’s structural integrity required the professional services of an engineering firm. The Court’s conclusion is supported by the wording in the complaint, which explicitly attributes the breach of BMI’s duties as “professional responsibilities.”
In an apparent effort to avoid the professional services exclusion of the policy, BMI argued that its employee that was present at the time of the accident was not performing a professional responsibility since he had only a high school level education and was simply measuring pipe for the purposes of payment. In rejecting that argument, the Court stated that the complaint on its face alleged negligent performance of professional services and did not assert improper non-technical activities. As explained by the court:
“We recognize that some of the conduct complained of may not require ‘the application of special skill, knowledge and education.’ The complaint does not, however, allege that it was improper performance of BMI’s non-technical activities that caused [the worker’s injuries]… Nor is there any dispute that BMI’s role on the project was the provision of professional services.”
Moreover, the court noted that “the complain is explicit in attributing the accident to a breach of BMI’s ‘professional responsibilities’ as the ‘engineering firm’ on the site.”
For all these reasons the court in the case of QBE Insurance Corp v. Brown & Mitchell, Inc., 591F.3d 439 (U.S. 5th Cir., December 2009), summed up by stating: “[E]ven studiously construing the policy in favor of BMI, the allegations in the complaint are precisely the sort of potential liability the professional services exclusion is designed to excise from coverage.”
Comment: No explanation is provided by the court as to why the engineer looked to a CGL policy for coverage instead of to a professional liability policy. Perhaps the answer is as simple as the engineer didn’t have a professional liability policy. There are some design firms, however, that have both types of policies but who would still prefer to see coverage for bodily injury and wrongful death covered under their CGL policy instead of the professional liability policy. This may be because the deductible on the CGL policy is often significantly less than that under the professional policy. Or perhaps it is because bodily injury claims and wrongful death seem to have more of a general liability feel to them. Nevertheless, it is possible for services that are purely professional to cause errors or omissions that might lead to bodily injuries. Such claims arising out of professional services fall within the coverage typically provided by professional liability policies (otherwise known as errors & omissions policies) and are excluded from coverage under the CGL policy due to that policy’s professional services exclusion.
About the author: J. Kent Holland is a construction lawyer located in Tysons Corner, Virginia, with a national practice (formerly with Wickwire Gavin, P.C. and now with Construction Risk Counsel, PLLC) representing design professionals, contractors and project owners. He is also founder and president of ConstructionRisk, LLC, a consulting firm providing consulting services to owners, design professionals, contractors and attorneys on construction projects. He is publisher of ConstructionRisk.com Report and may be reached at Kent@ConstructionRisk.com or by calling 703-623-1932. This article is published in ConstructionRisk.com Report.