The California Court of Appeal has held that a “professional services” exclusion did not relieve a general liability insurer of the duty to defend its insured, a consulting firm, against claims arising from injuries to a worker at a jobsite where the insured was providing consulting services. ( Food Pro International, Inc.., v. Farmers Ins. Exchange (2008) 2008 WL 5401336)
Facts
Mariani Packing Company (Mariani), a fruit processing company, decided to move its operations from an old plant in San Jose to a new plant in Vacaville. In order to assist in the relocation, Mariani hired Food Pro International, Inc. (Food Pro), a consulting firm that prepares and implements plans for food processing operations. Among other things, the contract between Mariani and Food Pro required that Food Pro would coordinate the movement of food processing equipment from Mariani’s old plant in San Jose to its new plant in Vacaville. The contract did not require Food Pro to provide a safe work place for workers.
Mariani itself hired the contractors that physically moved the equipment. In the course of moving a piece of equipment, Mariani’s mechanical contractor left a large hole in the second floor of Mariani’s old plant in San Jose. Food Pro personnel saw the hole and suggested that Mariani employees cover it, but Mariani employees failed to do so.
One week later, Mariani’s electrical contractor sent several employees to Mariani’s old plant in San Jose in order to disconnect some equipment. In the process of that work, one of the electrical contractor’s employees, Roy Pettigrew (Pettigrew), fell through the hole in the second floor of the San Jose plant and suffered serious injuries. At the time of Pettigrew’s accident, Food Pro personnel were present at Mariani’s San Jose plant, supervising the “overall process” of moving the equipment. However, Food Pro personnel did not have a contractual obligation to ensure safety conditions at the site.
The injured worker, Pettigrew, filed a personal injury lawsuit against Food Pro. In addition, Pettigrew’s employer’s workers compensation insurer, Explorer Insurance Company (Explorer), filed a subrogation lawsuit against Food Pro in order to recover the amount of workers compensation benefits that Explorer had paid to Pettigrew. Pettigrew and Explorer both alleged that Food Pro had negligently failed to cover the hole through which Pettigrew fell and/or negligently allowed Pettigrew to work near the hole.
Food Pro tendered both lawsuits to its general liability insurer, Farmers Insurance Exchange (Farmers). The Farmers general liability policy contained an endorsement labeled “Exclusion – Engineers, Architects or Surveyors Professional Liability.” It barred coverage for bodily 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, specifications; and [2.] supervisory, inspection or engineering services.” Relying on this “professional services” exclusion, Farmers refused to defend Food Pro against the lawsuits filed by Pettigrew and Explorer.
Pettigrew and Explorer later obtained default judgments totaling over $1.7 million against Food Pro. Food Pro tendered the judgments to Farmers for payment, but Farmers refused to pay.
Food Pro then filed a breach of contract / bad faith lawsuit against Farmers, alleging that Farmers had wrongfully failed to defend and indemnify Food Pro in the underlying lawsuits brought by Pettigrew and Explorer. The trial court ruled that Farmers’ “professional services” exclusion applied, and that Farmers thus had no duty to defend or indemnify Food Pro in the underlying lawsuits. Food Pro appealed.
Holding
The Court of Appeal reversed, holding that Farmers’ “professional services” exclusion did not relieve Farmers of a duty to defend Food Pro in the underlying lawsuits. The appellate court agreed that Food Pro, in coordinating the movement of Mariani’s equipment, was providing “professional services” to Mariani. However, according to the appellate court, Food Pro’s professional services to Mariani “did not extend to the creation of the hole, the safety of the site, or the direction of Pettigrew….” Thus, according to the appellate court, Food Pro’s alleged liability in the underlying lawsuits arose from Food Pro’s “ordinary negligence,” and not from its “professional services.” As such, Farmers’ “professional services” exclusion did not apply and Farmers was therefore obligated to defend Food Pro in the underlying lawsuits.
Comment
The result in this case seems debatable. The Farmers policy excluded coverage for bodily injury “arising out of” (i.e., flowing from) Food Pro’s rendition of “professional services” (i.e., skilled services). “But for” the fact that Food Pro was performing “professional services” for Mariani in the first place, Food Pro would never have had any involvement in the Mariani project, and thus Food Pro would never have faced any liability for the injury to Pettigrew. In this sense, it can be said that Food Pro’s alleged liability for Pettigrew’s injury did in fact “arise out of” (flow from) Food Pro’s rendition of “professional services” (skilled services) for Mariani.