General Contractor (GC) constructed two condominium buildings too close to the adjoining property. This was due to an error made by the land surveyor who was working under subcontract to the GC. An occupancy permit would not be issued by the County unless the problem was remediated. Rather than tearing the buildings down, the GC paid the neighboring landowner for a strip of land along the property line and that resolved the set-back distance problem. The GC sought the property purchase costs as damages under its CGL policy.
The carrier denied coverage due to the professional services exclusion. The court agreed. Some of the interesting issues included an argument that a land surveyor was not a “professional” and also because he was a subcontractor, his services would be covered regardless. The court did a nice job explaining why a land surveyor is indeed a professional and also why it is not relevant whether the land surveyor is a subcontractor to the GC. Western National Mutual Ins. Co. v. TSP, Inc., 904 N.W. 2d 52 (2017).
The trial court granted summary judgment against the carrier, finding coverage under the CGL policy. Western National appealed, alleging there is no coverage under the policy for the surveying error because there was no property damage caused by an occurrence. In Western National’s view, this is because “[d]efective work which causes damage only to the insured’s work product itself is not an ‘occurrence.’ ” Additionally, Western National contends there was no damage to property as a result of the surveying error because the finished structures never impinged upon a third party’s property. Even if the policy covers the error, Western National submits that coverage is precluded by the “work-in-progress,” “faulty workmanship,” and “professional services” exclusions.
None of those issues were considered by the appellate court because it cut to the chase by holding that the “professional services” exclusion applies to defeat coverage.
With regard to the professional nature of land surveying services, the court stated that although the CGL policy did to expressly define “professional service”, the court had previously defined the term in CGL policies to mean “those acts or services entailing the performance of a vocation, calling, or occupation requiring learning and intellectual skill.” The court then went on to further explain, as follows:
“The Legislature has clearly identified land surveying as a professional service. Further, the nature of land surveying as a vocation requiring specialized knowledge and the application of intellectual skill support the inclusion of land surveying as a professional service under the endorsement. See also Minn. Stat. § 326.02 (imposing licensing requirements on persons engaged in a variety of professions including land surveying).”
“[The]argument that including land surveying as a professional service gives an overbroad meaning to the endorsement is unpersuasive. It may be true that the professional services endorsement “should not apply to construction work performed by contractors[.]” Scott C. Turner, Insurance Coverage of Construction Disputes § 39:3 (2d ed.), Westlaw (database updated June 2017). However, “[t]his distinction for contractors is part of the larger distinction between professional services which require specialized knowledge or training and involve the exercise of judgment and those services involved in the execution of a decision based on non-professional judgment.” Id. Land surveying requires intellectual assessments and the use of professional judgment in comparison to a general construction task like putting up a wall, which involves manually implementing an existing plan. Including land surveying as a professional service will not give this endorsement improper breadth. See Maine Mut. Fire Ins. Co. v. Tinker, 178 Vt. 522, 872 A.2d 360, 362 (2005) (holding the phrase “rendering or failing to render any professional service” unambiguously includes land surveying in a CGL policy exclusion).”
About the author: Article written by J. Kent Holland, Jr., 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 founder and president of a consulting firm, ConstructionRisk, LLC, 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, Vol. 20, No. 3 (Mar 2018).
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