A professional services exclusion in a commercial general liability policy means something. It’s an exclusion an insurer will rely on to avoid insurance coverage based on “professional services” performed or rendered by the insured. Don’t take it from me. Take it from the recent opinion in Colony Insurance Company v. Coastal Construction Management, LLC, 2022 WL 16636697 (M.D.Fla. 2022) where the trial court granted a commercial general liability insurer’s motion for judgment on the pleadings based on the professional services exclusion.
Here, an owner sued, among other parties, an entity performing only construction management services based on construction defects at its project. The construction manager did not perform any design or physical construction. It was hired to make site inspections of the construction, review construction quality and finish standards, ensure workmanship quality, coordinate the punchlist process, and supervise management and administration of the project.
The construction manager’s commercial general liability insurer sued for declaratory relief claiming it owed no duty to defend or indemnify based on the professional services exclusion.
The professional services exclusion stated that the commercial general liability insurance did not apply to property damages:
[A]rising out of the rendering or failure to render any professional service. This includes but is not limited to:
(3) inspection, supervision, quality control, architectural or engineering activities done by or for you on a project on which you serve as a construction manager;
(4) engineering services, including related supervisory or inspection services.”
Colony Insurance, supra, at *3.
While the words “professional” or “professional services” were not a defined term in the policy, the court found they do have commonly understood meanings: “professional services are those that require a high degree of training or proficiency or involve specialized knowledge, skill, or labor that is primarily mental rather than physical.” Colony Insurance, supra, at *3. (Just because a word or term is not defined in the policy does not make the word or term ambiguous. Id.)
The court found that the professional services exclusion applies to bar coverage. This means the construction manager’s commercial general liability insurer owed no duty to defend the construction manager in the underlying case and no duty to indemnify the construction manager for damages.
As a matter of common sense, the management, supervision, and quality control activities alleged in the complaint in the context of a construction project of the size and scope alleged are not activities a layperson could take. Therefore, reading the exclusion in context and from the perspective of an ordinary person, the Court has no difficulty concluding without extensive analysis that these duties and tasks by their nature require specialized skill, training, and/or experience. As such, the only reasonable conclusion is that the [owner’s underlying] claims against [the construction manager] fall within the [professional services exclusion].
Finally, paragraph (3) [in the exclusion above], if anything, supports the application of the exclusion here because ‘inspection, supervision [and] quality control’ are precisely the types of activities [owner’s] complaint alleges [the construction manager] undertook to perform. The fact that those activities are listed in the exclusion are linked to [the construction manager] acting as ‘construction manager’ does not mean that the activities themselves would change their character if [construction manager] where somehow acting solely as a “construction consultant’ or an ‘owner’s representative.’ In any event, the nature of the activities themselves controls, and the activities alleged in the complaint plainly required specialized training and experience.
Colony Insurance, supra, at *4 (internal citations omitted).
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