Figg Bridge Engineers, Inc. (“FIGG”) and Munilla Construction Management, LLC (“MCM”) contracted to design and construct a pedestrian bridge on the Florida International University campus. The bridge collapsed, killing and injuring several people. Lawsuits followed. The commercial general liability (CGL) primary and umbrella policies included professional liability exclusions for damages “arising out of” rendering any professional services. The carriers obtained declaratory judgment that they owed no duty to defend the insured design professional because all allegations of the complaint against the designer implicated professional services. This also entitled them to reimbursement of $270,000 they had already spent in defending the engineer pursuant to a reservation of rights letter. Travelers Indemnity Company v. Figg Bridge Engineers, Inc., 389 F.Supp. 1060 (2019).
The polices in question contained identical exclusions for bodily injury or property damage “arising out of the rendering of or failure to render any professional services.” The exclusion defines professional services as “any services requiring specialized skill or training, including:
a. Preparation, approval, provision of or failure to prepare, approve, or provide any map, shop drawing, opinion, report, survey, field order, change order, design, drawing, specification, recommendation, warning, permit application, payment request, manual or instruction;
b. Supervision, inspection, quality control, architectural, engineering or surveying activity or service, job site safety, construction contracting, construction administration, construction management, computer consulting or design, software development or programming service; or selection of a contractor or subcontractor; or
c. Monitoring; testing, or sampling service necessary to perform any of the services described in Paragraph a. or b. above.
The carriers asserted they owed no duty to defend FIGG because every allegation in the underlying personal injury complaints falls under the professional services exclusion. They argued that even if the allegations don’t describe “professional services” they at least “arise out of” the professional services that FIGG rendered or failed to render.
FIGG, in arguing for coverage under the CGL policies, asserted that “despite the breadth of ‘arising out of’ and the definition of ‘professional services’ in the professional services exclusions”, there were allegations in the complaint that didn’t fall solely and entirely within the definition of “professional services” and were therefore outside of the exclusion.
In analyzing the merits of the arguments, the court looked only to the underlying complaints and the wording of the exclusion, and did not consider the wording of the design-build contract.
The Broad Nature of “Arising Out Of” Language
The court explained that when the words, “arising out of” are used in a contract, this does not require “proximate cause.” It is much broader than direct and proximate cause. As a side note, this is why attorneys and risk managers for design firms are so insistent on revising indemnification wording in design professional contracts to eliminate indemnity for damages “arising out of” wording and replace it with indemnity for damages “to the extent caused by” wording. As explained by the court:
The term ‘arising out of’ is broader in meaning than the term ‘caused by’ and means ‘originating from,’ ‘having its origin in,’ ‘growing out of,’ ‘flowing from,’ ‘incident to’ or ‘having a connection with.’ ” … The term “requires more than a mere coincidence between the conduct … and the injury. It requires some causal connection, or relationship.” It does not require proximate cause.”
Even in the exclusionary context, “arising out of” retains its broad interpretation. See Garcia v. Fed. Ins. Co., 969 So. 2d 288, 293 (Fla. 2007). The Florida Supreme Court has held the phrase “arising out of” is broader than the phrase “because of” and contemplates a more attenuated link. See id. Federal courts have consistently applied this broad construction to “arising out of” provisions. See Zucker for BankUnited Fin. Corp. v. U.S. Specialty Ins. Co., 856 F.3d 1343, 1350 (11th Cir. 2017) (“Decisions of the Florida Supreme Court, the Florida Courts of Appeal, and this Court show that the ‘arising out of’ standard is not difficult to meet.”); see also James River Ins. Co. v. Ground Down Eng’g, Inc., 540 F.3d 1270, 1275 (11th Cir. 2008).
What services are deemed “Professional Services”?
When professional services are undefined, the court states that the courts consider many factors, including “whether the service involves specialized skill, required specialized training, is regulated, requires a degree, and/or whether there is an entity that certifies or accredits persons or that sets forth standards of practice for the performance of those services.” “Whether ‘an act results from the nature of a professional services is determined by focusing upon the particular act itself, as opposed to the character of the individual engaging in the act.”
In this case, the CGL carriers asserted that the allegations against FIGG “arise out of” FIGG’s work as an engineer and its exercise of professional judgment. The court agreed that the underlying complaints alleged FIGG was liable by virtue of the engineer’s status and by accepting duties, obligations and responsibilities attendant to the design and construction of the pedestrian bridge. “The design and construction of a pedestrian bridge requires specialized skill or training.”
The court then went through each count of the complaint and determined that regardless of what words were used to describe the theories of liability (e.g., gross negligence, professional gross negligence, design and engineering, strict liability, ‘management, control and supervision,’ failure to warn, failure to ensure safety, misrepresentation that project construction was safe, ordinary negligence rather than professional, failure to disclose that bridge was unsafe, etc.)
Not Necessary for Policy to List every Service that is within Exclusion
The court says that FIGG argued that if a specific term is not expressly listed as a professional service it doesn’t fall under the professional services exclusion. “Not so,” says the court. “The exclusion by its own terms, provides a non-exhaustive list of predetermined professional services.” The fact that the word “construction” does not appear by itself in the non-exhaustive list of activities that constitute professional services doesn’t mean that the act of construction is not a professional service, concluded the court.
FIGG’s assertions fail to persuade. By its plain meaning, the Exclusion encompasses these activities as professional services. (See Exclusion ¶¶ 3(a)–(c)). Failing to require “construction operations to cease” arises out of the professional service of “construction management.” (Id.). Additionally, decisions on “post-tensioning operations” and acts or omissions challenging the “integrity” of the bridge “during the movement and erection phase” necessarily arise out of “engineering services” under the Exclusion. (Id.).
Undeterred, FIGG states “[o]ther counts against FIGG allege that FIGG failed to control certain aspects of the project as well as disclose information, and neither term or activity is excluded by the definition of ‘professional services.’ ” (Def.’s Reply 9 (citing MWC ¶¶ 161, 174) (alteration added)). FIGG’s reliance on the absence of a specific term from “professional services” is again misplaced. As to the specific allegations to which FIGG cites, the MWC discusses “the practices exercised by FIGG with respect to the management, control, and supervision of the FIU pedestrian bridge project” (MWC ¶ 161 (emphasis added)); and how “FIGG failed to disclose known information about the condition of the bridge to those working on the construction site of the bridge project” (id. ¶ 174).
Contrary to FIGG’s assertions, these allegations from the MWC fall under the Exclusion. The “management, control, and supervision” of the bridge project arise out of FIGG’s “supervision,” “quality control,” “engineering services,” or “construction management.” (Exclusion ¶¶ 3(a)–(b)). Further, actions or inactions relating to the safety of the bridge site arise out of “job site safety” or “engineering services,” and the failure to disclose information certainly arises out of the “failure to provide an opinion, recommendation, or warning.” (Id.).
For the reasons explained in great detail in the decision, the court found that all allegations of the underlying complaints against the engineer constituted allegations “arising out of” the performance or failure to perform professional services and were, therefore, excluded from coverage under the CGL policy. The CGL carrier was therefore not obligated to defend the engineer against the suit, and was in fact entitled to recover attorneys fees it expended in defending the engineer under a reservation of rights letter.
Comment: This decision presents a very thorough and well-reasoned explanation of the professional liability exclusion in a standard CGL policy. It is important to note how the court cut through the arguments that attempted to show that the engineer performed non-professional services, and that it was those non-professional services that entitled the engineer to coverage under the CGL policy. A key to the analysis was the application of the very broad meaning of “arising out of” professional services and the broad scope of services included within the definition of “professional services” under the policies.
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 ConstructionRisk 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. 21, No. 9 (Oct 2019).
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