construction contracts, construction insurance policies, insurance coverage contractors, insurance exclusions in the construction context, legal insurance claim coverage

State Farm Tries to Deny Coverage: Claims GC’s Work was a “Professional Service”

Stephen
The United States District Court had occasion to hear yet another attempt by an insurance company to deny coverage to its insured: this time a general contractor. In State Farm and Casualty Co. v. Lorrick Pacific, LLC, 2012 U.S. Dist. LEXIS 57922 (D. Ore. Apr. 24, 2012), the Court was asked by State Farm to deny coverage under the general liability policy it issued to its general contractor.  The reason: the insurance carrier argued that the general contractor’s coordination and management of subcontractors constituted a professional service, which was excluded in the general liability policy.

The complaint filed against the general contractor alleged that it failed to properly supervise and coordinate the construction of the subcontractors and suppliers for the project. Because the general liability policy issued by State Farm included an exclusion for “bodily injury, property damage or personal injury due to rendering or failure to render any professional services or treatments…[including] supervisory or inspection services…”, State Farm asked the court to rule that there was no “duty to indemnify” its insured.

The court held that a professional services exclusion did not apply to the term “supervisory” in the general contractor sense. Instead, the court found that “supervisory services” is something over and above overseeing the work of subcontractors, stating that:

“Here, the Professional Services Exclusion provides explicit examples of the types of services qualifying as “professional services.” Such examples include legal, accounting, engineering, architectural, “supervisory or inspection,” medical, and veterinary services. It is noteworthy that although the Policy states that “supervisory” services fall under the term “professional services,” it makes no mention of coordinating services, including coordinating the work of subcontractors.”

Because of the failure to specifically reference work performed by general contractors, the court found that State Farm’s argument could not withstand judicial scrutiny.