(Article from Insurance Law Alert, June 2024)
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Holding
An Illinois appellate court ruled that all underlying allegations fell within the scope of a professional services exclusion and that the insurer had no duty to defend. Allied Design Consultants, Inc. v. Pekin Ins. Co., 2024 Ill. App. Unpub. LEXIS 1077 (Ill. App. Ct. May 23, 2024).
Background
Allied Design Consultants was hired to perform architecture services related to the construction of an addition to a middle school building, including the design of mechanical systems. After the construction project was completed, a carbon monoxide leak caused injury to occupants of the new structure.
Pekin Insurance Company, Allied’s business liability insurer, refused to defend a lawsuit against Allied, arguing that coverage was barred by professional services exclusions in the operative policies. A trial court ruled in Pekin’s favor and the appellate court affirmed.
Decision
Allied argued that the underlying complaint alleged acts of negligence—such as the failure to warn, maintain and repair and to follow manufacturer directions—that did not involve professional services. Rejecting this assertion, the appellate court explained that failures to warn or repair were a direct result of Allied’s failure to properly conduct a “Health/Life Safety Survey Report” for the project, which indisputably constituted a professional service. Similarly, the court held that any failure to follow instructions published by product manufacturers constituted a professional architecture service, requiring specialized knowledge and being predominantly intellectual in nature.
The court acknowledged that in other cases, failure to warn allegations have been deemed to fall outside the scope of a professional services exclusion. However, such cases involved factual records in which the operative conduct was primarily physical, rather than professional, in nature, such as the failure of a construction company to post a flagman or adequate warning signs at a roadwork site.
Comments
As the court noted, Illinois courts have adopted an “expansive definition” of the term “professional services” in exclusionary provisions and have applied them to any activity that involves “specialized knowledge, labor, or skill, and is predominantly mental or intellectual as opposed to physical or manual in nature.”