Professional Services Exclusion Bars Coverage After Carbon Monoxide Leak
The Illinois Appellate Court affirmed the trial court's dismissal of the insured's complaint after damage caused by a leak of carbon monoxide caused bodily injury. Allied Design Consultants, Inc. v. Pekin Ins. Co., et al., 2024 Ill. Ct. App. LEXIS 1433 (June 18, 2024).
Carbon monoxide leaked in a building addition to a middle school, prompting 23 lawsuits to be filed against the insured, Allied Design Consultants, Inc. Allied was retained to perform certain architectural services to the building addition. Pekin Insurance Company had issued a business owners liability policy and a commercial umbrella liability policy to Allied. Pekin denied a defense to Allied based upon the policies' professional services exclusions.
Allied filed suit for declaratory relief against Pekin. Pekin filed a counterclaim, seeking a declaratory judgment that it had no duty to defend. The parties filed cross-motions for summary judgment. The parties agreed the allegations in the personal injury complaint filed by Ferguson were typical and representative of the allegations in the other 22 underlying lawsuits.
Count IV of the Ferguson complaint set forth a negligence claim against Allied. It alleged that Allied had a duty to perform in a workmanlike manner and in accordance with industry standards, customers, and practice, and a common law duty of ordinary care so as not to cause injury to persons. The Ferguson complaint further alleged that Allied breached one or more of its duties of care by negligently and carelessly performing its work. As a direct and proximate result of the breach of its duties of care by Allied, the combustion exhaust vent pipe for the domestic water heaters resulted in an uncontrolled leak of carbon monoxide gas within the school addition, caused serious and permanent injuries.
The trial court granted Pekin's motion, finding that Pekin had no duty to defend because none of the allegations in the underlying complaint fell outside or even potentially outside, the professional service exclusions. Allied appealed contending Peking owed a duty to defend and it breached its duty. Allied argued that the Ferguson complaint contained allegations not involving professional services, but alleged negligent acts of failure to warn, maintain, repair and follow the manufacturer's directions.
Pekin's business policy included a professional services exclusion barring coverage for "bodily injury" due to rendering and failing to render any professional service. This included supervisory, inspection or engineering services. The umbrella policy also contained an exclusion for any damages because of professional liability. Professional liability was defined as "legal liability for damages due to the rendering of or failure to render any professional service, in the practice of the insured's profession, by the insured."
The appellate court determined that Allied overlooked the fact that the failure to both warn about and properly repair or otherwise remedy the issues with the hot water heaters must have resulted from the failure to properly conduct the survey, which Allied did not challenge fell under the professional services exclusion. Moreover, the failure to follow documents published by the manufacturer of the hot water heaters would be part of the survey process or other "professional architecture services" rendered by Allied.
Therefore, Allied failed to demonstrate the trial court erred in finding that the allegations of the underlying lawsuits fell under the professional services exclusion of the policies.
