WALTER HILDEBRANDT PERS REP V RUMSEY & SONS CONSTRUCTION INC
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STATE OF MICHIGAN
COURT OF APPEALS
WALTER HILDERBRANDT, Personal
Representative of the ESTATE OF MICHAEL
WALTER HILDERBRANDT, as same, and as
assignee of ENGINEERING TECHNOLOGIES
CORPORATION,
UNPUBLISHED
June 5, 2001
Plaintiff-Appellee,
v
No. 220340
Livingston Circuit Court
LC No. 95-014384-CK
RUMSEY & SONS CONSTRUCTION,
Defendant / Third-Party Plaintiff,
and
DAVID CHAPMAN AGENCY, INC.,
Defendant / Cross-Plaintiff /ThirdParty Defendant,
and
DAVID CHAPMAN,
Defendant,
and
WESTFIELD INSURANCE COMPANY,
Defendant-Appellant,
and
TRAVELERS CASUALTY & SURETY
COMPANY, f/k/a AETNA CASUALTY &
SURETY COMPANY,
Defendant / Third-Party Defendant /
Cross-Defendant.
Before: Saad, P.J., and White and Hoekstra, JJ.
-1-
PER CURIAM.
Defendant Westfield Insurance Company (defendant) appeals as of right the circuit
court’s grant of summary disposition and entry of judgment in plaintiff estate’s favor in this
insurance coverage dispute between plaintiff’s assignor, Engineering Technologies Corporation
(ETC), and ETC’s general liability insurer, defendant. The circuit court concluded that defendant
wrongfully refused to defend ETC in an underlying wrongful death action, and that defendant
was obligated to indemnify against a consent judgment negotiated in that case. We reverse.
I
Plaintiff’s decedent, Michael Hilderbrandt, was an employee of Rumsey & Sons
Construction, Inc., (Rumsey) the general contractor on a water main replacement project for the
City of Howell, when he was fatally injured on a job site of that project on June 29, 1992, after a
trench collapsed on him. Hilderbrandt was twenty-seven years old. ETC, an engineering firm
that did consulting and contract work for the City, designed the water main project for the City,
assisted in preparation of the bidding documents, and recommended to whom the bid should be
awarded. The City of Howell and Rumsey entered into a written contract, portions of which are
quoted infra. There was no written agreement between ETC and the City of Howell, but they
had an oral agreement that ETC would serve as the consulting engineer and inspector to monitor
Rumsey for the purpose of ensuring compliance with the contract.
ETC had a commercial general liability (CGL) policy with defendant, and did not have a
professional liability policy at the time. Defendant initially undertook ETC’s defense of
plaintiff’s underlying wrongful death action without reservation, but later withdrew its defense,1
stating that all allegations against ETC fell within the CGL policy’s “professional services”
exclusion.
In the underlying wrongful death action, plaintiff estate and ETC entered into a settlement
that included the entry of judgment against ETC for $750,000 and an assignment to plaintiff by
1
Defendant’s appellate brief states that ETC “timely tendered its defense to defendant, who
retained defense counsel without reserving any rights. As a result of information learned during
discovery, however, Westfield issued a letter to [ETC] on September 27, 1994, reserving its right
to deny coverage under the professional services exclusion.” Defendant’s brief further states that
it tendered ETC’s defense to Rumsey and Rumsey’s insurance carrier, Aetna, and that Rumsey
had a duty under its contract with the City of Howell to indemnify both the City and ETC against
any claims arising out of the project, and Rumsey had a duty to name both the City and ETC as
additional named insureds in its insurance policy for the project. Both Rumsey and Aetna
refused to accept ETC’s tender of defense.
Defendant’s brief states that after determining that coverage under its policy was excluded by the
professional services exclusion and exhausting all other options for the tender of ETC’s defense,
defendant wrote to ETC on November 18, 1994 and advised that it would withdraw its defense
after ETC had opportunity to retain counsel. Defendant states that it continued to provide ETC a
defense until substitute counsel filed an appearance in April 1995.
-2-
ETC of any claims that ETC had against all possible defendants involved in this action, including
Westfield. The estate covenanted not to enforce the judgment against ETC beyond $10,000, in
return for ETC’s assignment of rights. After the underlying wrongful death action was settled,
the estate, standing in ETC’s shoes in this action, commenced a garnishment action against
defendant.
On the parties’ cross-motions for summary disposition, the court denied plaintiff’s motion
and granted summary disposition to defendant based on MCR 2.116(I). However, on plaintiff’s
motion for reconsideration, the circuit court granted summary disposition in plaintiff’s favor and
ultimately entered judgment against defendant.2 The parties agree that the sole remaining
controversy is whether defendant breached its duty to defend ETC in the underlying wrongful
death action.
II
Defendant argues that the circuit court erred as a matter of law in finding that it breached
its duty to defend ETC in the wrongful death action because the claim arose out of ETC’s
rendering or failure to render supervisory, inspection or professional engineering services and
thus fell under the CGL policy’s “professional services” exclusion.
Plaintiff’s appellate brief argues in response that ETC’s failure to advise Rumsey of
MIOSHA violations, as alleged in the underlying complaint against ETC, did not involve the
rendering or the failure to render “professional services,” and was separate and distinct from any
of the professional services performed by ETC in connection with the Howell project. Plaintiff
relies on testimony of ETC’s President, Kenneth Cousino, who testified that one need not be a
professional engineer to recognize a violation of MIOSHA; that one need not recognize
violations of MIOSHA to be licensed as a professional engineer; that Ed Loescher, the ETC
representative at the construction site, was not trained to recognize violations of MIOSHA
standards; and that Loescher was assigned to the site primarily to perform services that did not
require a professional engineering degree or license.
In its reply brief on appeal, defendant more clearly defines its challenge:
It is undisputed that [ETC] designed a water main project for the City of Howell
and assisted the city in its preparation of the bidding documents. It is undisputed
that the project was awarded to Rumsey & Sons as the general contractor who
assumed the responsibility for the means, methods, techniques, sequences and
procedures of construction. It is undisputed that [ETC] was hired by the City of
Howell as the “project engineer” to monitor Rumsey & Sons for the purpose of
ensuring compliance with contract specifications.
2
A final judgment for $577,456 was entered in plaintiff’s favor against Westfield, representing
the $740,000 settlement, apparently reflecting a credit for $10,000 paid by ETC, less $310,000
paid by codefendants, plus pre- and post-judgment interest totaling $147,456.
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The issue before the Court is whether the project engineer’s monitoring of a water
main project, which it designed, to ensure compliance with contract
specifications, which it helped develop, amounts to a “professional service”
within the meaning of a standard commercial general liability contract exclusion.
A
We review a circuit court’s grant or denial of summary disposition de novo. Spiek v
Dep’t of Transportation, 456 Mich 331, 337; 572 NW2d 201 (1998). The construction and
interpretation of an insurance contract is a question of law we review de novo. Henderson v
State Farm Mutual Ins, 460 Mich 348, 353; 596 NW2d 190 (1999).
An insurer’s duty to defend is broader than the duty to indemnify. GAF Sales & Service,
Inc v Hastings Mut Ins Co, 224 Mich App 259, 261; 568 NW2d 165 (1997). An insurer has a
duty to defend, despite theories of liability asserted against any insured which are not covered
under the policy, if there are any theories of recovery that fall within the policy. Radenbaugh v
Farm Bureau General Ins Co of Michigan, 240 Mich App 134, 137; 610 NW2d 272 (2000). To
determine whether there is a duty to defend, “this Court looks to the language of the insurance
policy and construes its terms to find the scope of the coverage of the policy.” GAF Sales, supra
at 261. There is a duty to defend if the allegations of the underlying suit arguably fall within the
coverage of the policy. Id.
“[T]he ‘insured bears the burden of proving coverage, while the insurer must prove that
an exclusion to coverage is applicable.’” Heniser v Frankenmuth Mut Ins, 449 Mich 155, 161 n
6; 534 NW2d 502 (1995), quoting Arco Industries Corp v American Motorists Ins Co, 448 Mich
395, 424-425; 531 NW2d 168 (1995) (Boyle, J., concurring).
B
The allegations in the underlying wrongful death action as to ETC that are most
particularly at issue in this appeal are:
20. That the Defendant, Engineering Technologies Corporation, was guilty of the
following acts of negligence and gross negligence:
(h) Failing to advise the employees of Defendant, Rumsey & Sons Construction,
Inc., and specifically the decedent, Michael Walter Hilderbrandt, of violations of
safety standards with regard to excavation, trenching and shoring;
(i) Failing to advise the supervisors of Defendant, Rumsey & Sons Construction,
Inc., of violations of safety standards with regard to excavation, trenching and
shoring.3
3
The underlying complaint also alleged negligence and gross negligence with respect to ETC:
(continued…)
-4-
The professional services exclusion at issue is contained in an endorsement to ETC’s
CGL policy issued by defendant, entitled “Exclusion–Engineers, Architects or Surveyors
Professional Liability,” and states:
This endorsement modifies insurance provided under the following:
COMMERCIAL GENERAL LIABILITY COVERAGE PART.
This insurance does not apply to “bodily injury,” “property damage,” “personal
injury” or “advertising injury” arising out of the rendering or failure to render any
professional services by or for you, including:
1.
The preparing, approving, or failing to prepare or approve maps, drawings,
opinions, reports, surveys, change orders, designs or specifications; and
2.
Supervisory, inspection or engineering services.
C
(…continued)
(a) Failing to provide adequate safety supervision of the excavated trench in which
the decedent [] was working;
(b) Failing to provide adequate safety inspections of the excavated trench in which
the decedent [] was working;
(c) Failing to personally train the supervisors and employees of Defendant,
Rumsey & Sons Construction, Inc., in adequate safety measures for excavating,
trenching and shoring;
(d) Failing to report to the Defendant, City of Howell, clear violations of
excavating, trenching and shoring standards being committed by Defendant,
Rumsey & Sons Construction, Inc.;
(e) Failing to employ safety inspectors with sufficient training to understand and
evaluate violations of safety standards as they relate to excavating, trenching and
shoring;
(f) Failing to properly supervise their employees to ensure that they were properly
performing their responsibilities in the inspection and safety supervision of
excavating, trenching and shoring;
(g) Failing generally to make reasonable supervision and reasonable safety
inspections of the excavating, trenching and shoring portion of the Defendant,
Rumsey & Sons Construction, Inc., project;
-5-
Although Kenneth Cousino, ETC’s founder and president and a licensed professional
engineer, and Terry Wilson, the City of Howell’s Public Service Director, asserted that ETC had
no obligations regarding safety on the project,4 plaintiff relied on Howell’s contract with Rumsey
which included the following provisions:
4
Documentary evidence submitted below included Cousino’s affidavit, which stated:
7. Based upon my understanding of the role of the consulting engineer and the
contract provisions, [ETC] was not authorized and was not responsible for safety
inspection, safety supervision, nor training of the contractor and its employees
regarding safety. ETC also was not responsible under the Contract for reporting
safety violations to the City. Furthermore, as the consulting engineer, ETC was
not authorized nor responsible for employing safety inspectors or for supervising
the contractor’s employees.
8. [ETC] also acted as the Inspector for the City of Howell and was authorized by
the contract to inspect for quality of workmanship and materials. Workmanship
was inspected periodically to determine the quality of the labor and the completed
product.
Excerpts of Cousino’s two depositions were submitted below as well. Cousino testified:
Q What was your understanding as to ETC’s agreement with the City of Howell
regarding Mr. [Loescher’s] position on the site?
A Ed was on site to inspect the quality of the completed construction so that it
would conform to the city’s specifications that were issued for the construction of
the project. Referring to, you know, the pipe was installed properly and the joints
were made up tight and it didn’t leak when they did pressure testing.
***
Q Did ETC have any on-job site responsibilities on this City of Howell project
with regards to safety inspections of work done by the contractors?
A No.
Q No duties, for example, to make sure that the trenches were a certain width at
the top or that they were properly shored or trench boxes are used or anything of
that nature?
A No. No. It was the quality of the completed construction is what we were
there to inspect.
(continued…)
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1. DEFINITIONS OF TERMS
1.2 Whenever the term “Contractor” is used herein, it shall be understood to refer
to the parties contracting to perform the work to be done under this Contract or to
his legal representatives.
1.3 Whenever the term “Engineer” is used herein, it shall be understood to refer
to an individual, firm or corporation, or their representatives who were
responsible for the design of the project and provide the plans and specifications
by which also evaluate [sic] the work of this project as the work is constructed.
1.4 Whenever the term “inspector” is used herein, it shall be understood to refer
to an individual, firm or corporation, or their representatives employed by the City
for the purpose of inspecting the various operations of construction and pass upon
the suitability of the material to be used in the construction, on or off the site.
2. ENGINEERING SUPERVISION
2.1 The Engineer and the Inspector shall have authority to inspect all materials
and workmanship entering into the work, to furnish all instructions and
information regarding the plans and specifications that may be necessary, to
supply supplementary or additional plans or specifications as he may deem
expedient, and to point out to the Contractor any disregard of any provisions of
this Contract; but the right of final acceptance or condemnation of the work will
not be waived at any time during its progress.
***
25. SAFETY REGULATIONS
The Contractor shall obey and abide by all laws of any other unit of government
relating to safety of employees and working conditions and other personnel on the
job site. [Emphasis added.]
(…continued)
Wilson, the City of Howell’s Public Service Director, testified that his understanding of
the oral agreement between ETC and the City of Howell with regard to ETC’s job
responsibilities on the 1992 water main project was that ETC had no responsibility for: safety or
supervision of the excavated trench; safety inspections of excavating, trenching, shoring and the
excavated trench; training or supervising Rumsey employees with regard to adequate safety
measures for excavating, trenching and shoring; reporting violations of excavating, trenching and
shoring standards by Rumsey; employing safety inspectors with sufficient training to understand
and evaluate violations of safety standards; or advising Rumsey supervisors of violations of
safety standards with regard to excavation, trenching and shoring.
-7-
Defendant argues that, assuming ETC had a duty to monitor and advise Rumsey of
MIOSHA violations, “any duty to report safety violations necessarily involves inspection and
supervision, both of which are activities excluded from coverage under this policy.” Defendant
notes that ETC’s purported failure to report MIOSHA violations “is a failure to report some
event connected to its performance of its engineering agreement with the city,” and that the
professional services exclusion unambiguously precludes coverage for claims arising out of such
a failure.
Defendant further argues that plaintiff’s “approach is to segregate each allegedly
wrongful act and determine whether, standing alone, it amounts to a professional activity.”
Defendant asserts that although some courts have followed this approach,5 Michigan has clearly
rejected that kind of analysis and instead analyzes a claim of negligence in its entirety, citing in
support Centennial Ins Co v Neyer, Tiseo & Hindo, Ltd, 207 Mich App 235; 523 NW2d 808
(1994), Bernthal Aetna Casualty & Surety Co, 195 Mich App 501; 491 NW2d 236 (1992),
nullified 444 Mich 1216 (1994),6 and American Fellowship Mutual Ins Co v Insurance Co of
5
Defendant cites Erie Ins Group v Alliance Environmental, Inc, 921 F Supp 537 (SD IN), aff’d
102 F3d 889 (CA 7, 1996), to support its argument that even where courts “follow plaintiff’s
more narrow approach of examining particular conduct to determine whether it is professional in
nature, the consensus appears to be that if the activity was being performed in furtherance of the
terms of the professional agreement, any claims arising out of that activity will be subject to the
professional services exclusion.” Erie’s lengthy analysis includes discussion of many cases,
none of which defendant discusses.
6
Bernthal, supra, has no precedential effect, as it was nullified by the Supreme Court after the
parties settled and stipulated to dismiss the appeal pending before that Court. See 444 Mich
1216-1217 (1994). The policy at issue in Bernthal was a “general insurance policy covering
plaintiff’s business premises,” that “excluded coverage for accidents or injuries caused by
rendering or failing to render a ‘professional service.’” 195 Mich App at 502. The underlying
suit was brought by a patient of the plaintiff eye doctor, who fell after the examination chair she
attempted to sit in rotated. The circuit court determined that the term “professional service” was
ambiguous because it was not defined in the policy. This Court reversed, concluding that the
term “professional service” is unambiguous:
[W]e believe the term “professional service” has a plain meaning and that judicial
construction was unnecessary. See Friske v Jasinski Builders, Inc, 156 Mich App
468, 472-473; 402 NW2d 42 (1986).
Secondly, the insurance policy excludes coverage for injuries arising from the
rendering of or the failure to render a professional service. We believe it is clear
that plaintiff was rendering a professional service when Hugaert was injured. We
find the authority cited by defendant in this regard, especially American
Policyholders Ins Co v Michota, 156 Ohio St 578; 103 NE2d 817 (1952), to be
persuasive. In Michota, the Ohio Supreme Court included in the definition of the
term “professional services” the maintenance, in a safe condition, of a metal
hydraulic chair because the maintenance of the hydraulic chair was part of the
chiropodist’s “professional service.”
(continued…)
-8-
North America, 90 Mich App 633; 282 NW2d 425 (1979). Defendant also relies on Atlantic
Mutual Ins Co v Continental National American Ins Co, 123 NJ Super 241; 302 A2d 177
(1973).7
(…continued)
In the underlying action, Hugaert was injured when the examination chair rotated
as she was attempting to sit down to have her eyes examined by plaintiff. The
examination chair was a piece of specialized equipment used by plaintiff in
examining his patients. We believe that, as in Michota, the safe operation of the
examination chair was part of plaintiff’s professional service. Therefore,
Hugaert’s injuries arose from the rendering of or failure to render a professional
service. Because the insurance policy excluded coverage for such injuries,
defendant is under not obligation to indemnify plaintiff for losses incurred in the
underlying action. [Bernthal, supra at 503-504.]
7
Atlantic Mutual was a declaratory action to decide which of two insurance carriers was
responsible for a previously agreed on settlement. In an underlying action, two employees of a
general contractor injured when a trench collapsed brought suit against a professional
engineering firm, Killam Associates, and their employer. Atlantic Mutual had issued a CGL
policy to the engineering firm, and Continental had issued a professional liability policy to the
engineering firm. The professional engineering firm had contracted with a township to
“furnish general supervision of the work of the contractor as the construction
progresses, to assist in a correct interpretation of the plans and specifications and
to safeguard the Township against defects and deficiencies on the part of the
contractor.” [Id. at 243.]
Two employees of the contractor performing the sewer work referred to in defendant’s contract
with the township were injured when the sewer trench they were working in collapsed. The
injured employees brought suit against the professional engineering firm and their employer. Id.
The employees’ complaint alleged that the professional engineering firm “negligently and
carelessly supervised, controlled and directed” the contractor’s work; that the engineering firm
maintained a supervisory engineer at the job site and was thus in actual control of the work being
done, that the engineering firm approved an unsafe method of excavation and permitted the
employees to descend into the excavation. The CGL policy had an endorsement titled
“Exclusion of Malpractice and Professional Services” that stated:
It is agreed that as respects any classification stated above (Architect and
Engineering, Draftsman) . . . the policy does not apply to injury . . . due to the
rendering of or failure to render Any professional service.
The lower court held that the engineering firm’s acts were in the nature of professional services
excluded under the CGL, but covered under the professional liability policy. The superior court
affirmed. The court stated that “[t]he bracing used in the trench violated the New Jersey
Construction Safety Code and it was the express responsibility of [the engineering firm] to advise
(continued…)
-9-
(…continued)
the township of any such deviation.” Id. at 244. In addressing the “key question” whether the
engineering firm’s alleged acts were in the nature of professional services specifically excluded
under the CGL policy, the court noted:
A standard test as to what does fall within the meaning of a professional act is set
forth in 7A Appleman, Insurance Law and Practice s 4504.3 (1972 Supp. at 77).
Professional services, in its usual connotation, means services
performed by one in the ordinary course of the practice of his
profession, on behalf of another, pursuant to some agreement,
express or implied, and for which it could reasonably be expected
some compensation would be due.
The contract herein reads:
The supervision by the Engineer contemplated by this contract
shall be that normally provided by a Consulting Engineer. The
Engineer shall watch and report on the progress of the work and
shall promptly report to the Township any substantial deviations
from the contract.
The supervision by Killam Associates which both parties contracted for is
predominantly mental or intellectual. It required observation and constant
evaluation of the work being done. The main thrust of the original plaintiffs’
cause of action was the alleged failure of Killam Associates to observe that the
contractor was violating the New Jersey State Construction Safety Code as to the
manner in which the trench was fortified. The acts of Killam Associates in this
respect clearly required the specialized knowledge and mental skill of a
professional engineer.
The service performed herein was within the ordinary practice of Killam
Associates as professional engineers. It was done on behalf of another, the
township, pursuant to a contract which provided Killam Associates with monetary
compensation. It is generally held that under statutes relating to the licensing of
professional engineers, the field of engineering involves the making of plans and
designs as well as the supervision of construction. [Citations omitted.]
It is the decision of this court that Killam Associates was derelict in providing
professional services specifically excluded from coverage under the Atlantic
Mutual Insurance Company policy. The full amount of the settlement of $68,500
is to be paid by the Continental National American Insurance Company which
under its policy specifically covered this type of professional activity. [Id. at 246248.]
Another case supporting defendant’s position is Sheppard, Morgan & Schwaab v United States
(continued…)
-10-
Centennial, supra, was a suit between a general liability insurer and a professional
liability insurer to determine which insurer was responsible for indemnifying the insured, an
engineering consulting firm, for its negligence. The policy of the professional liability insurer,
Imperial, covered “professional services,” and the general liability insurer, Centennial, excluded
such services in its policy. Id. at 236.
In Centennial, a hospital contracted with an architectural firm for various improvements.
The architectural firm contracted with the insured, an engineering consulting firm (Neyer, Tiseo)
to perform a soils investigation. Neyer, Tiseo contracted with West Michigan Drilling to conduct
the soil sampling. The architectural firm supplied Neyer, Tiseo with site location and plans,
which did not show subsurface telephone lines. Two Neyer, Tiseo employees, a senior
engineering technician and a staff engineer, neither of whom was licensed by the state, were on
site on the day of the incident. The senior engineering technician tried to locate subsurface utility
lines by consulting the site plans and checking the manhole and concluded there were no utility
lines in the area of the first boring. Neither Neyer, Tiseo nor its subcontractor, West Michigan
Drilling, had contacted “Miss Dig,” a statutorily mandated organization created to receive notice
of proposed excavation. Id. at 237. West Michigan Drilling began drilling and encountered an
obstruction. The Neyer, Tiseo senior engineering technician determined that the obstruction was
fill and drilling continued. The drilling damaged a Michigan Bell cable and Michigan Bell sent
notice of a claim for damages. Neyer, Tiseo sought coverage from Centennial, its general
liability insurer, asserting that “the damage occurred during the drilling of holes in the field, not
during the performance of professional services.” Centennial responded and asked that Imperial
be put on notice because Michigan Bell’s allegations against Neyer, Tiseo were for negligence
and for identifying the drilling location. It was agreed that Centennial would defend the suit
without prejudicing the rights of the parties in a subsequent declaratory judgment action, which
would decide liability for the full amount of the assessment. Id. at 237-238. After both insurers
and the insured filed motions for summary disposition, the circuit court granted Centennial’s
motion and denied the others. On Imperial’s appeal, this Court affirmed:
In this case, “professional services” are within the terms of coverage of Imperial’s
policy and are specifically excluded by Centennial’s policy. Centennial’s
exclusion encompasses “preparation or approval of maps, plans, opinions, reports,
surveys, designs or specifications,” and “supervision, inspection or engineering
services.” Imperial argues that the failure to call “Miss Dig” did not involve a
professional service, and Neyer, Tiseo contends that Centennial’s exclusion clause
is ambiguous. We do not agree. The challenged terms have plain meanings and
judicial construction is unnecessary. See Friske v Jasinski Builders, Inc, 156
Mich App 468, 472-473; 402 NW2d 42 (1986).
An application for leave to appeal this Court’s decision in Bernthal v Aetna
Casualty & Surety Co, 195 Mich App 501, 504-504; 491 NW2d 236 (1992), was
dismissed by stipulation of those parties, and the Court of Appeals decision was
(…continued)
Fidelity and Guaranty, 44 Ill App 3d 481; 358 NE2d 305 (1976).
-11-
declared by the Supreme Court to have no precedential force or effect, 444 Mich
1217 (1994). Nonetheless, we find the reasoning in Bernthal persuasive. See also
American Policyholders Ins Co v Michota, 156 Ohio St 578; 103 NE2d 817
(1952). The decision in this case to drill for soil samples before calling “Miss
Dig” was preliminary to, and part of, the “professional service” of conducting a
soil investigation. [Centennial, supra at 238-239. Emphasis added.]
In American Fellowship Mutual, supra, the plaintiff insurer (AFM) was sued in an
underlying action by a woman who had been attacked in a parking lot in which she rented space.
The underlying suit was for negligence and breach of contract against AFM, and alleged that the
mechanical gate to the parking lot had been damaged two months earlier by an auto driven by an
insured of AFM, and that the attackers thus got access to the lot because of AFM’s failure to
have the gate timely repaired. Id. at 634. AFM had an “office building” insurance policy issued
by the defendant (INA) that insured AFM’s office building, but did not insure the building
adjacent to the parking lot at issue. AFM asked INA to take over AFM’s defense. Clause “n” of
the insurance policy excluded personal injury due to “the rendering of or failure to render . . . .
any professional service.” Id. at 635.
The circuit court granted INA’s motion for summary disposition, concluding that AFM’s
adjusting services were professional services within the meaning of the insurance contract. On
AFM’s appeal, this Court affirmed, noting that the sole question was whether INA’s insurance
contract covered liability arising out of the alleged negligent operation of AFM’s business. Id.
Although one might argue in the abstract whether the services of an insurance
adjustor could be deemed a “professional service”, in reviewing the surrounding
exclusions as stated in clause “n” of the policy, it is clear that services such as
those performed by plaintiff were intended to be excluded from coverage.
This same interpretation has been given to similar exclusions in other
jurisdictions. An “owners’, landlords’ and tenants’” insurance policy issued to a
beauty shop operator and covering, as the court put it, “ordinary risks of dwellings
and commercial buildings”, was involved in Knorr v Commercial Casualty Ins
Co[, 171 Pa Super 488; 90 A2d 387 (1952)]. An exclusion specifically provided
that the policy did not apply to the rendering of any “professional services” by any
person, including any physician, surgeon, dentist, optician, nurse, barber,
manicurist, masseur, chiropodist, or other attendants. The injury occurred when a
customer seated under a hair dryer was struck on the head when the machine
unexplainedly fell forward and downward. Holding that the drying of a
customer’s hair in the beauty parlor by means of a mechanical hair dryer
constituted professional services and, thus, came within the exclusion of the
policy, the court said that since the policy was issued specifically to cover a
beauty parlor, it was clear that the term “professional services” referred to the
technical work performed by beauticians and hairdressers.
In Multnomah County v Oregon Automobile Ins Co, [256 Or 24; 470 P2d 147
(1970)], plaintiff sued the county for the failure of prison authorities to give a
prisoner a necessary shot of insulin. The court, in interpreting an exclusion for a
-12-
“professional act or service” within a liability policy that excluded “(2) injury,
sickness . . . due to the rendering of or failure to render any professional service”,
found that a jail medical technician was rendering a “professional service” and
stated:
“In determining whether a particular act or omission is of a
professional nature, the act or omission itself must be looked to and
not the title or character of the party who performs or fails to
perform the act. Marx v Hartford Accident and Indemnity
Company,[183 Neb 12; 157 NW2d 870 (1968)]. The decision to
give or to withhold insulin required the application of special
learning which the medical attendant lacked and Barendrecht [the
prisoner] was therefore deprived of a professional service which, if
given, would have resulted in the required injection.
“5. The County also contends that the provision is
ambiguous and can be construed as being applicable only to a set
of facts which involve a direct and immediate failure of a licensed
physician to act or to act properly in relation to a patient. In effect,
the contention is that the exception contemplates only a set of facts
which would substantiate an action of medical malpractice against
a physician. We cannot so construe it. It excepts from coverage
the insured’s failure to render a professional service.’ 256 Or 24,
28-29.
In the case at bar, the trial court did not err in determining that the “professional
services” exclusion, as used in the life [sic] insurance contract, refers to any
business activity conducted by plaintiff insurance company. [90 Mich App at
636-638. Emphasis added.]
To the extent that defendant argues that plaintiff incorrectly focuses on the specific
activity involved, we disagree. Application of the exclusion requires an examination of the
nature of the act or omission involved, rather than the title or character of the person who
performed or failed to perform the act. Id. Thus, the issue is whether the failure to advise
Rumsey and its employees of safety violations was a failure to render a professional service. It is
also the case, however, that the fact that Loescher was not himself an engineer is not controlling.
We agree with defendant that although one must look to the act or omission involved, the
Michigan cases reveal a broad view of the term “professional services,” and that it is not
dispositive that one need not be an engineer to recognize a MIOSHA violation in trenching.
Assuming ETC had a duty to recognize and advise regarding such a violation, the failure to do so
involves a failure to render the professional inspection and supervision services assumed under
the contract. The recognition of such a violation involves some specialized knowledge and
expertise in the area of trenching for water main replacement, which was allegedly to have been
provided by ETC under the contract. We conclude that under Michigan case law the exclusion is
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not ambiguous, and the circuit court erred in concluding that the allegations in the underlying
complaint did not fall within the exclusion.8
Reversed.
/s/ Henry William Saad
/s/ Helene N. White
/s/ Joel P. Hoekstra
8
We are aware that there are cases that have held that allegations of failure to supervise with
respect to safety violations do not constitute allegations regarding “the performance of
professional services.” CBM Engineers, Inc v Transcontinental Ins Co, 460 So2d 745, 747 (La
Ct App, 1984), and Gregoire v AFB Const, Inc, 478 So2d 538, 541 (La Ct App, 1985), held that
an engineering firm’s breach of its duty to warn of unsafe conditions could be found to be outside
of the “professional” or “supervisory” services it contracted to provide and that a general liability
insurer had a duty to defend. Additionally, at oral argument before this Court, plaintiff cited
Camp Dresser & McKee, Inc v Home Ins Co, 30 Mass App Ct 318; 568 NE2d 631 (1991), which
affirmed the lower court’s determination that the defendant insurer had breached its duty to
defend the plaintiff, an international consulting engineering firm under contract with the City of
Detroit to provide services with regard to Detroit’s water pollution control system and its
wastewater treatment plant.
However, the Louisiana cases seem to be based on a general duty regarding the work place, not a
duty assumed under a contract to perform professional services, and the Camp-Dresser case
included allegations of negligence concerning the insured’s actual management and control of a
waste treatment plant.
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