It’s an awful thing to see two insurance companies, toe to toe, fighting each other to the death. Imagine Flo stomping on the GEICO Gecko…
Well, maybe “awful” is a slight overstatement, but today’s case does pit two insurance companies against each other. One insured an engineering firm against professional negligence (malpractice), while the other one that insured the company against everything else. And you can bet that they were arguing over who would get the honor of picking up the check.
Compare it to a doctor’s office: if you doctor cuts off your ear when he or she was supposed to be curing your eczema, that would be covered by the professional insurer (assuming a jury thought it might be malpractice). If after you get the ear cut off, you slip and fall on a wet floor while paying, the doctor’s general insurer would cover your sore tush (financially, of course).
The engineering firm, an outfit named Czop/Specter, Inc. (pronounced “czop-specter”), had a contract with the Commonwealth of Pennsylvania to inspect its highways, and — when it found a dangerous condition — to schedule crews to fix it. Czop/Specter had an employee whose credentials were approved by PennDOT, who took special training in highway standards and then performed the inspections. When poor Mr. Cuthbertson (just your average motorist) was hurt by some driver who blew through a stop sign, his lawyer — who had no interest in committing legal malpractice — sued everybody. Claiming that the driver who hit his client couldn’t see a stop sign obscured by trees and foliage, Cuthbertson included the engineering firm Czop/Specter as a defendant in the suit, claiming that Czop/Specter should have identified the obscured sign and had the trees trimmed. Czop/Specter’s insurance companies were fighting over whether the negligence that the plaintiff alleged was covered by the professional liability policy (the cut-off ear) or the general policy (a slip on the wet floor).
The insurers sued in federal court, asking it for a declaratory judgment – simply an order from the court determining whether any damages that might be awarded because of any negligence should be paid by the professional liability insurer or general insurer. The professional liability insurance company claimed that the allegedly negligent inspection wasn’t a professional service, but instead could have been performed by anyone. The general insurer argued the liability wouldn’t belong to it, because its policy specifically excluded inspections from covered acts. The court said that the employee who performed the inspections had to be approved beforehand by PennDOT, had to complete special training and — although not an engineer himself — had other specialized education in herbicide application which was necessary for the position. The court’s conclusion: you don’t have to be a doctor or lawyer to provide professional services.
Is there a lessons here? The court seemed to suggest that because the claimed negligence didn’t fall under one policy, it necessarily had to fall under the other. But that ain’t necessarily so. It’s entirely possible that Czop/Specter could have found itself being sued for negligence on a matter that no one ever contemplated — a passenger in a car hit because of an obscured sign because of an untrimmed tree because of a negligent inspection — one that was covered by neither policy. A lesson for arborists and tree specialists. You’d be wise to carefully read those boring, tedious, incomprehensible policies.
Lumbermens Mut. Cas. Co. v. Erie Ins. Co., 2007 WL 2916172 (E.D.Pa., Oct. 21, 2007). Donald Cuthbertson, Jr. was injured in an auto accident when another driver drove through a stop sign and collided with the car in which Cuthbertson was riding. Cuthbertson sued in state court, alleged among other things that the accident occurred because the driver did not see “an obscured and otherwise difficult to observe stop sign … due to a combination of factors, including tree branches, vegetation, bushes, brush and grass which obstructed visibility of eastbound drivers west of the stop sign.”
Czop/Specter, Inc., held a contract with the Pennsylvania Department of Transportation to perform inspections on the highway and to schedule any work required as a result of the discovery of hazardous road conditions resulting from overgrown vegetation. The inspection and scheduling services were performed by Czop’s employee, David Riley. In his complaint, Cuthbertson asserted that Czop was negligent in the performance of the contract.
Lumbermens Insurance provided a defense to Czop under the terms of an Architects and Engineers Professional Liability Policy that covered claims “arising out of a wrongful act in the performance of ‘professional services’.” Professional services were defined as “those services that the insured is legally qualified to perform for others in the insured’s capacity as an architect, engineer, land surveyor, landscape architect, construction manager or as defined by endorsement to the policy.” Lumbermens claimed that Erie Insurance Exchange — which insured Czop against general claims — had the obligation to defend, because the inspection services weren’t “professional services.” Erie’s policy contains an endorsement excluding from coverage “damages due to any services of a professional nature, including but not limited to: … supervisory, inspection, or engineering services.” Erie argued that the services performed by Czop through Riley constituted supervisory and inspection services and, therefore, the claim is excluded from coverage under the Erie policy. The battling insurers asked a federal district court to settle the dispute between them.
Held: Lumbermens must defend Czop from the lawsuit, because the services were professional in nature. Under the law, a ‘professional’ act or service is one arising out of a vocation, calling, occupation, or employment involving specialized knowledge, labor, or skill, and the labor or skill involved is predominantly mental or intellectual, rather than physical or manual.
In determining whether a particular act is of a professional nature or a ‘professional service’ a court must look not to the title or character of the party performing the act, but to the act itself. Riley’s services under the Engineering Agreement were “services of a professional nature” because the job entailed Riley’s inspection and supervisory services, which could not have been performed by just “anyone” and which were expressly excluded from coverage under the Erie policy. The Engineering Agreement required Czop to submit Riley’s credentials for approval by PennDOT for the position of “Roadside Development Consultant.” Riley was then trained by a PennDOT employee, and he attended mandatory seminars that prioritized needed work and roadside vegetation control. Upon completing his training, Riley conducted inspections in order to identify hazards, scheduled roadside work to be performed by others in accordance with PennDOT’s standards, and supervised the contractors performing the work.
The Court found that Riley could not have performed the job without the specialized training he received from PennDoT. Riley did not hold an engineering degree, although Czop is an engineering firm. Riley did, however, have specialized herbicide training which he used in connection with his inspection responsibilities under the Engineering Agreement. One need not be a doctor or a lawyer to render professional services. The job that Czop was paid for was the inspection and supervisory services performed by Riley. His failure to inspect and supervise the trimming of the vegetation that obscured the stop sign — if it happened — would constitute a “wrongful act in the performance of professional services” as that term was defined in the Lumbermens policy.
– Tom Root