Injured Worker's Tort Action Potentially Outside CGL Policy's “Professional Services” Exclusion
In Food Pro Intern., Inc. v. Farmers Insurance Exchange, 2008 WL 5401336 (Cal.App. 6 Dist), an injured construction worker brought a tort action against appellant Food Pro International, Inc. (Food Pro), relating to an injury at a food processing plant. Food Pro is a consulting firm that prepares and implements “plans for food processing and distribution operations,” and its personnel are “food production and distribution specialists” that “offer a complete range of consulting engineering services from studies (e.g., long range planning, feasibility, site selection) to construction and equipment installation management.”
Food Pro tendered defense of both the worker's action and a related action to its insurance carrier, respondent Farmers Insurance Exchange (Farmers). Farmers denied coverage, and Food Pro brought an action against Farmers for breach of contract and breach of the implied covenant of good faith and fair dealing. The trial court entered judgment for Farmers following a court trial on Farmers' duty to defend. On appeal, Food Pro contended the trial court erred in finding that Farmers did not have a duty to defend Food Pro pursuant to a commercial general liability (CGL) insurance policy. Food Pro also appealed from the trial court's earlier summary adjudication of Food Pro's claim for punitive damages.
The Court of Appeal, Sixth District, reversed the trial court's judgment that Farmers had no duty to defend Food Pro.
The court first held that the tort action against Food Pro was potentially outside the “professional services” exclusion in the company's commercial general liability (CGL) policy, thus Farmers had a duty to defend the company. Food Pro representatives testified that their supervisory role was limited to coordination of the overall process, that the worker was injured while performing a project that had been ordered by his foreman rather than by Food Pro, and that Food Pro's professional services did not extend to the creation of the hole in the mezzanine where the worker fell, the safety of the site, or the direction of the crew.
In addition, Food Pro's evidence suggested its representative's involvement in the accident was merely as an observer who noticed the danger and notified the responsible party, thus any failure to rectify the situation was ordinary negligence.
Also, the worker's fall through the hole was potentially a covered “occurrence” within the meaning of Food Pro's CGL policy defining occurrence as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” Thus, Farmers had a duty to defend the company after Food Pro presented evidence that any failure to eliminate the danger was ordinary negligence rather than an omission within the scope of its professional services.
Finally, the court held that punitive damages were not appropriate for Farmers' incorrect refusal to defend Food Pro, absent evidence that the insurer's actions were malicious, fraudulent, or in blatant violation of law or policy. Farmers had relied upon separate coverage opinions by two different law firms that there was no potential for coverage because of the “professional services” exclusion in the policy, and the trial court agreed that there was no potential for coverage. Therefore, the court found no merit to Food Pro's punitive damages argument.