When a swimming pool builder was sued by an individual that suffered injury in the pool that the builder contracted with the health club to design and construct.  The complaint alleged negligent design.  The builder tendered the claim to its commercial general liability (CGL) carrier and excess CGL carrier to defend.  The carriers refused to defend – asserting that the professional liability exclusion in their policies barred such coverage.  Summary judgment was granted to the carriers based on the fact that the complaint filed by the plaintiff alleged negligent design, and such design services were expressly excluded from coverage under the policies.  Citizens Insurance Co. v. Panzica Building Corp., 2020 WL 7338495 (U.S.N.D. Indiana 2020).

Both insurance policies contained the typical professional liability exclusion found in GCL policies.  The court found that claims regarding the negligent design of the pool and the failure to warn are not insured because the alleged negligence was not an “occurrence” as required under the policy, but were instead based on “professional errors and omissions.”   “Occurrences”, ordinarily don’t include contractual obligations, explains the court, which states that “In contrast to professional errors and omissions, a CGL policy insures against ‘slip and fall accidents and the like.”  The court states, “The failure to meet a standard of care under a contractually assumed duty is not an ‘accident.’”

In this case, the underlying litigation involved a contractual relationship with a health club and a builder, which required the builder to design and construct the Health & Lifestyle Fitness Center – including the pool.  The contract stated that architectural services would be provided by the principal of Panzica and by another named individual acting as a subconsultant. The court states that the Center “sought out PBC for its design expertise.”  Looking at the words in the Complaint, the plaintiff asserted that the injuries occurred due to the rendering of or failure to render professional services.

Three exclusions in the CGL policies specifically reference architectural and engineering work and both policies contained the following two exclusions:

“(1) the preparing, approving, or failing to prepare or approve, maps, shop drawings, opinions, reports, surveys, field orders, change orders, or drawings or specifications; and (2) supervisory or inspection activities performed as any related architectural or engineering activities.”

“In determining whether the professional liability exclusion applies to a given situation, “the focus must be on whether the claimant is seeking to impose liability for acts which were taken in the course of providing professional services and which drew upon … the professional’s training, skill, experience, or knowledge.”

PBC asked the court to review and analyze the facts in the underlying litigation, but the court stated it wouldn’t do that because that is beyond the scope of the case.  Instead, the court “looks only to the complaint to see if coverage would attach if proven true.”  Because the complaint on its face alleges negligent design by PBC that is all the court will rely upon in rendering its decision.

Risk Management Comment:  Builders and contractors who offer design services as part of their work proposals should obtain professional liability coverage rather than argue that their CGL polices will cover their professional exposures.  It is surprising how many court cases there are similar to the one reported here.


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 Report and may be reached at Kent@ConstructionRisk.com or by calling 703-623-1932.  This article is published in ConstructionRisk Report, Vol. 23, No. 3 (May 2021).

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