Savers Prop. & Cas. Ins. Co. v. Rockhill Ins. Co.
2022 WL 9461874 (S.D. Ind. 2022)
In Savers Prop. & Cas. Ins. Co. v. Rockhill Ins. Co., county residents sued a nearby landfill, claiming they and their properties were being harmed by noxious odors, pollutants, and contaminants originating from the landfill. The landfill sought coverage from its commercial general liability (“CGL”) insurers, including Rockhill Insurance Company. Although the case addresses coverage arguments raised by other insurers, our update focuses only on the arguments raised by Rockhill.
Rockhill denied coverage to the landfill for two reasons. First, Rockhill argued that its CGL policy provided no coverage because the allegations against the landfill did not constitute an “occurrence,” which the policies define as “an accident, including continuous repeated exposure to substantially the same general harmful conditions.” Citing the Indiana Supreme Court’s decision in Tri-Etch, Inc. v. Cincinnati Ins. Co., 909 N.E.2d 997, 1002 (Ind. 2009), Rockhill asserted there is a difference between an accident or “occurrence,” which a CGL policy covers, and a professional error, which is covered by an errors and omissions policy. According to Rockhill, because the landfill failed to perform its contractually assumed duties, the resulting damages are not an occurrence, but a business risk not covered under its CGL policy.
The Southern District of Indiana federal court disagreed because the residents did not allege that the landfill breached a contractually assumed duty but that it breached the duty not to create a nuisance that interferes with the residents’ use and enjoyment of their property. “This duty,” the court explained, “exists outside of and in spite of the contract,” and thus constitutes an “occurrence.”
Second, Rockhill argued that it owed no coverage to the landfill because its CGL policy had a “professional services” exclusion that barred coverage for bodily injury or property damage “due to the rendering of or failure to render any professional service, including but not limited to:
- Medical, health care, psychiatric, psychological, nursing, emergency medical or related services;
- Legal, paralegal, or related services;
- Engineering architectural, surveying, or related services;
- Testing, consulting, or related services;
- Insurance, investment, financial, accounting, billing, or related services;
- Security guard, investigative, risk management, or related services;
- Pastoral, counseling, or related services;
- Teaching, or related services;
- Barber, cosmetology, or related services.”
Rockhill’s excess policy had a similar “professional services” exclusion. Although Rockhill’s CGL policy gave examples of professional services, neither it nor Rockhill’s excess policy defined the phrase. Thus, the court turned to prior Indiana decisions, which have recognized that “professional services” in an insurance policy means “any business activity conducted by the insured which involves specialized knowledge, labor or skill which is predominantly mental or intellectual as opposed to physical or manual in nature.” Terre Haute First National Bank v. Pacific Employers Ins. Co., 634 N.E.2d 1336, 1339 (Ind. Ct. App. 1993).
Rockhill argued that the “professional services” exclusion applied because the landfill was a “sophisticated landfill operator” working in “a highly regulated environment” and “subject to the operating permit regulations under the control and implementation of [the Indiana Department of Environmental Management].” Although the court did not disagree with Rockhill’s description of the landfill, it held that “the construction and maintenance of a landfill, generally, does not constitute a professional service.” (emphasis added). Thus, to determine whether the “professional services” exclusions applied, the court turned to the specific allegations against the landfill.
The residents’ alleged damages stemmed from the landfill’s failure to prevent the migration of noxious odors and gases. Although migration might have been caused by the landfill’s failure to operate its gas collection and migration systems—likely a professional service—the court noted that the migration might have been caused by “the simple act of improperly covering the waste with dirt, which would clearly be unsophisticated manual labor and thus not be a professional service.” Moreover, the residents’ complaint alleged that the landfill was negligently construed, operated, and maintained. Based on these “broad claims,” the court could not say “with certainty” that all the claims “fall entirely within the professional services exclusion.” Because of the potential for coverage, the court held that Rockhill had a duty to defend the landfill against the residents’ claims.
The lines can become blurred when trying to determine whether something is a professional service or business error. This case shows how important it is to make that determination not on the general nature of the insured’s business and operations but the specific claims and allegations on which its potential liability is premised.
