Professional Services Exclusion Unambiguously Excludes Coverage for Negligent Building Design

The United States Court of Appeals for the Fifth Circuit has held that, under Louisiana law, an insurer had no duty to defend by operation of a professional services exclusion because the underlying complaint arose out of the rendering of or failure to render professional services.  Wisznia Co., Inc. v. General Star Indem. Co., No. 13-31125 (5th Cir. July 16, 2014). 

A design company was sued by a parish for improperly designing a building.  The parish alleged that the company agreed to use its professional architectural, engineering and construction administration skills and knowledge to prepare design plans and specifications.  The parish alleged that the damages it suffered were the “direct and proximate result of the design company’s breach of its contractual warranty, negligence, and lack of professional skill.”  The insurer denied coverage based on a professional services exclusion.  The district court agreed with the position, and the appellate court affirmed.

According to the Fifth Circuit, under Louisiana law, a professional liability exclusion applies where the alleged injury arises out of the rendering or failure to render professional services of any kind as opposed to arising out of a breach of the general duty of reasonable care during the course of rendering professional services.  The court held that the underlying petition, even “liberally construed, unambiguously excludes coverage” because the parish hired the design company “for its expertise,” and “it is not far-reaching to find that all of the services it rendered in connection with [building] project were professional in nature.”  Moreover, the court determined that the factual allegations, which included defective building design and construction supervision, did not give rise to an ordinary claim for negligence such as an unreasonably dangerous work site and that the repeated invocation of the word “negligence” in the petition was insufficient to obligate the insurer to defend the company.