General Contractor for a condo building settled the project developer’s claim against it and then filed suit against its subcontractor/engineer’s insurance agent based on the agent’s misrepresentation on a certificate of insurance and failure to procure additional insured coverage for the GC.   When retaining the engineer to prepare a geotech report and site survey, the GC sent the engineer its vendor packet with insurance requirements stating that all subcontractors must name the GC as an additional insured on the commercial general liability policy.  It included a specific sample Additional Insured Certificate.  The Engineer emailed the vendor packet to its insurance agent and requested the certificate of insurance, which the agent executed with the statement that the certificate holder was an additional insured.  When the claim was ultimately made, the insurance carrier declined to defend and indemnity the contractor because it asserted no additional insured endorsement had been issued, and because broad form additional insured coverage was not available due to lack of a written contract requiring such coverage.  Court held the agent failed in the duty it owed the GC to procure additional insured coverage and the professional services exclusion in the CGL policy didn’t unequivocally exclude coverage for the GC in this case.  TCF Enterprises Inc. v. Rames Inc., 415 Mont. 306 (Montana Supreme Ct 2024).

The insurance agent’s email to the GC had a certificate of liability insurance attached, with GC listed as the certificate holder, which contained the following language:

The certificate holder is listed as an additional insured on a primary and noncontributory basis for General Liability per policy for GCD037 04/05, for ongoing and completed operations. Waiver of subrogation for General Liability applies to certificate holder.

In contrast to what was represented on the certificate provided by the agent, the Agency did not actually procure additional insured coverage for the GC and did not list GC as an additional insured on the engineer’s policy through a scheduled endorsement.

The Policy contained a blanket additional insured endorsement which would require a written contract between the engineer and GC for additional insured status to apply, as well as a professional services exclusion. The carrier denied coverage to the GC for two reasons: (1) that GC was not covered as an additional insured under the blanket additional insured endorsement because there was no written contract reflecting such between the engineer and the GC, and (2) separately, even if the GC was named as an additional insured, the Policy’s professional services exclusion would bar coverage.

At trial, the trail court granted the GC’s motion of summary judgment against the agency because:

“The court found [Agency] did have a duty to procure the additional insured coverage, negligently failed to do so, negligently misrepresented that it had, and breached the standard of care. In addition, the court found the Policy’s professional services exclusion would not have barred coverage for defense and indemnity.”

The GC suffered $1,022,257.85 in damages due to Rames’s negligence, representing $1 million in loss of coverage and $22,257.85 in defense costs.

The summary judgment was affirmed on appeal.  The appellate court stated:

“[GC] was not listed as an additional insured. The Declaration of Mike Depner, GC’s expert in this case, further supports [Agent’s] own testimony that she knew the difference between a scheduled insured and a blanket insured and what was required of each, that the two are not equivalent, and that GC was not actually named as an additional insured.”

In holding that the professional liability exclusion did not bar coverage here, the court stated:

“We agree with the District Court that the professional services exclusion, which applies to “service[s] requiring specialized skill or training,” does not unequivocally exclude coverage for [GC],’s role as a general contractor. [GC], as a general contractor, provided services on the Project, such as the furnishing of labor, materials, tools, and equipment, which clearly do not require specialized skill or training. The developer of the 139 Project sued [GC], for both general and professional negligence. The allegations of general negligence in the Underlying Complaint did not require [GC], to have specialized skill or training, and therefore the professional services exclusion does not apply to defeat coverage under the facts of this case.3 In addition, were all coverage excluded for a general contractor which, as one portion of its duties, provides services which could be deemed “professional services” on a project, coverage would be illusory under the policy and “policy language which renders coverage illusory is against public policy.”

Comment:  The portion of this decision concerning the professional liability exclusion seems odd.  Services rendered by the engineer were professional services and the claim against the GC was based on those professional services.  Consequently, one would expect that professional liability exclusion to have been applied.  The services are described in he decision as follows:

“Though it performed soil testing, the test pits dug by [Engineer] did not go low enough to reach the native soils at the 139 Project site. [Engineer] provided recommendations regarding undocumented fill, subgrade preparation, and the placement of structural fill. [Engineer]’s report noted that if its recommendations were followed, “it is expected that total and differential settlement will be less than ¾-inch.” The condominium constructed for the 139 Project ended up settling over four inches.

Why the court didn’t apply the professional liability exclusion to a claim based on the above described services is not well explained in the decision.


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 or by calling 703-623-1932.  This article is published in ConstructionRisk Report, Vol. 26, No. 5 (June 2024).

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