Restoration Insurance: Professional Liability Exclusion Example
An engineering firm was contracted by a restoration contractor and restaurant owner to monitor the reparation of a pier on which a restaurant was located. The engineer found that the pier was not stable—the pier was actually moving. While the engineer did not believe the pier was in imminent danger of collapse, the engineer did testify he informed the owner of the restaurant that the pier was going to collapse. Soon after the pier suffered a catastrophic collapse, resulting in three deaths, numerous other injuries, and significant property damage.
The Complaint. The engineering firm and restoration contractor was one of many defendants named in a complaint that soon followed, which included allegations that both had a duty to warn the owner, public authorities, and the restaurant patrons and had failed to provide the requisite warnings. The restoration contractor sent the claim to its CGL and umbrella insurer.
Denial of Coverage. The insurer denied coverage under the firm's CGL and umbrella policy, citing the terms of the professional liability exclusion CG 22 43, contending the injuries and property damage came "under the mantle of professional services because the negligent conduct arose out of professional services rendered … and was thus excluded under both policies."
The Ruling. Because exclusions are to be strictly construed, the trial and appellate court found that the professional liability exclusion did not apply. The court stated, "The excluded acts in the CGL policy are the actual professional services, whereas the acts that fall within the products-completed operations relate to giving information i.e. warnings or instructions. Thus, we conclude liability … resulting from the failure to warn or give instructions was not excluded by the professional liability exclusion."
Completed Operations Coverage. In other words, the claims against the restoration contractor were found by the court to fall within the products-completed operations hazard—bodily injury or property damage occurring away from the firm's premises and arising out of "your work." "Your work" as defined in the CGL policy expressly states the term includes the providing of or failing to provide warnings or instructions.
Failure To Warn Is Not a Professional Service. But the court went even further, finding that the professional liability services exclusion would not have applied even in the absence of the products-completed operations coverage. According to the court, the failure to provide warnings did not emanate from the performance of or failure to perform actual professional services. The court observed:
To be sure, allegations respecting a professional's failure to provide adequate engineering, supervisory, inspection, or architectural services or to discover or remedy a condition for which the professional services were engaged would necessarily fall within the exclusion as dependent on the professional services provided. However, allegations encompassing the violation of a duty to provide information about a known danger resulting from either a negligent omission or commission, whether based upon the relationship of the parties or legal principle, are not dependent on the rendering of professional services. Instead, such allegations arise from the information actually possessed and not provided by a party obligated to disclose such information.
Put another way, the restoration contractor's failure to warn was not considered the rendering of or failing to render professional service, and the CGL and umbrella policies applied to the collapse loss.
