The insured performed architectural work in the construction of a parking garage in Atlantic City, NJ. The parking garage later collapsed, causing “numerous deaths and serious injuries.” The insured, among others, was sued by numerous claimants, who claimed that it deviated from the standard of care, violated OSHA guidelines, and was “otherwise careless and negligent.”
The insured firm sought coverage under its primary and excess CGL policies, but both insurers denied coverage on the basis of professional services exclusions. Both policies excluded claims for damages or injuries “arising out of the rendering of or the failure to render any professional services by you.” The firm sued the insurers, and the District Court granted summary judgment to the insurers and held they had no duty to defend.
On appeal, the Third Circuit agreed with the District Court. First, the appellate court rejected the firm’s argument that the insurers did not properly investigate the claims prior to denial, noting that the insurers conducted “thorough review[s] of coverage,” reviewed “numerous documents,” and wrote long, detailed letters explaining the denials.
Second, the court affirmed that all of the underlying claims were excluded under the professional services exclusions. The court rejected as irrelevant the insured’s contention that the underlying complaints alleged general “negligence,” because under New Jersey law, the “categorization of a party’s liability is determined based on the activity that party was involved in at the time the liability arose.” The court noted that the insured’s “only involvement with the garage collapse, which is the basis of the underlying suits, is that they had an Owner-Architect agreement with [the owner] and were performing as an architectural firm in accordance with that contract.” Therefore, the “bottom line” for the court was that “all of the allegations” in the underlying actions “arose out of” the firm’s professional services and were excluded.