Penn Star Insurance v. Real Estate Consulting Specialists, Inc.

Citations: 1 F. Supp. 3d 1168; 2014 U.S. Dist. LEXIS 20718; 2014 WL 657673Docket: No. CV 13-223-M-DLC

Court: District Court, D. Montana; February 18, 2014; Federal District Court

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The court, presided over by Chief Judge Dana L. Christensen, addressed cross-motions for summary judgment in a case rooted in a declaratory action initiated by Corrine Degolier, trust protector of the Leanne Hart Trust, against Real Estate Consulting Specialists, Inc. (RECSI) in Montana state court. The complaint asserted that Leanne Hart sustained injuries due to RECSI’s negligence in failing to conduct routine maintenance at her apartment, specifically alleging that she was scalded by hot water during a seizure while showering. 

Plaintiff Penn Star Insurance Company sought a judicial declaration to establish it has no obligation to defend or indemnify RECSI concerning Hart’s claims. At the time of Hart's injuries, RECSI was insured under a Commercial General Liability Policy issued by Penn, which stipulated coverage for damages due to bodily injury or property damage caused by occurrences within the specified coverage territory, including the U.S. and Canada. However, the locations listed in the policy do not include the site of Hart's injuries.

The policy includes an endorsement limiting coverage to designated operations, specifically those described as "Real Estate Property managed," and states that coverage for liability arising from property management is excess over any other valid insurance. Additionally, there is a Designated Professional Services endorsement that excludes coverage for bodily injury resulting from the rendering or failure to render professional services. 

Based on these facts, the court granted RECSI’s motion for summary judgment and denied Penn's motion.

The Schedule identifies Real Estate Property Management and Consulting as the described professional services. Penn argues that Hart's claims against RECSI are not covered under two main points: first, the insurance policy's coverage is limited to specific locations listed on the Declarations page and Supplemental Location Schedule; second, the Designated Professional Services endorsement explicitly excludes claims like Hart's. Summary judgment is warranted if there is no genuine dispute over material facts and the moving party is entitled to judgment as a matter of law, with the initial burden on the movant to demonstrate the absence of such disputes through documentary evidence. In Montana, insurance contract interpretation is a legal question, requiring that policies be read as a whole, with clear language governing. Any ambiguities must be construed in favor of the insured, particularly regarding exclusions, which should be strictly interpreted against the insurer. Additionally, the duty to defend is broader than the duty to indemnify within the same insurance contract.

The duty to defend an insured arises when a complaint alleges facts that, if proven, would trigger coverage under the insurance policy. Courts interpret allegations liberally in favor of finding a duty to defend, unless there is clear evidence that the claim falls outside the policy’s coverage. Penn argues against coverage and the duty to defend in the Hart lawsuit on two grounds: first, that Hart was injured at an uninsured location, and second, that the Policy’s Designated Professional Services endorsement excludes coverage for the alleged failure to perform routine maintenance.

Regarding the injury location, Penn cites the Declarations page and Supplemental Locations Schedule, asserting that coverage is limited to specified locations. However, the policy contains no language explicitly limiting coverage to these locations, and Montana law requires clear language for exclusions. The policy provides coverage for any bodily injury occurring within the coverage territory, which includes all of the United States. Penn's argument that coverage is restricted to listed locations is therefore unsubstantiated.

Concerning the Designated Professional Services endorsement, Penn contends that it excludes coverage for the professional services involved in Hart's claims. This argument is deemed without merit, particularly referencing recent Montana Supreme Court precedent which supports a broader interpretation of coverage in similar contexts. Overall, Penn has not demonstrated that there is no coverage for either the location of the injury or the professional services alleged.

Newman serves as binding authority in the current diversity suit, and the Court finds that the weight of authority supports RECSI's position against Penn's arguments, which rely on out-of-jurisdiction cases. In Newman, the Montana Supreme Court addressed a professional services exclusion from Scottsdale Insurance that closely resembles the exclusion in this case. The Scottsdale exclusion specified that it does not apply to bodily injury resulting from the rendering of professional services. The Court concluded that allegations against the insured, involving negligence as a marketing arm directing troubled teens to facilities, did not indicate the exercise of trained judgment or specialized learning associated with professional services. Furthermore, the Court noted that Scottsdale's vague definitions of "professional" and "professional services" rendered the coverage ambiguous and potentially illusory, as it could imply that all employees of the insured were considered professionals, making it difficult to envision scenarios where coverage would apply.

In the current case, the Court faces a similar Designated Professional Services exclusion where "professional" and "professional services" are not clearly defined. Penn argues that the description in the Schedule—Real Estate Property Management and Consulting—sufficiently defines the professional services excluded. However, the Court finds this description inadequate to exclude coverage for the claims made by Hart regarding negligence in routine maintenance duties. The language of the exclusion, when interpreted against the insurer and in conjunction with the Policy, does not effectively exclude potential liability for non-professional services, as Hart's allegations suggest injuries stemming from such services. The term "professional" must retain meaning, generally associated with trained judgment or specialized learning.

A professional is defined as someone in a learned profession requiring advanced training and proficiency, per Black’s Law Dictionary. Hart's complaint does not indicate a failure by such a professional. Case law asserts that a professional services exclusion applies only when the act in question necessitates specialized knowledge or judgment. Specifically, cases like Admiral Ins. Co. v. Ford and Bonnie Owen Realty, Inc. v. Cincinnati Ins. Co. illustrate that simple negligence or routine maintenance does not invoke this exclusion. Hart's complaint merely addresses routine maintenance failures, not professional misconduct.

The insurance policy in question includes provisions that explicitly cover liability for bodily injury related to RECSI's management of real estate, including a Real Estate Property Managed endorsement. The Court emphasizes that it must consider the policy as a whole and cannot accept an interpretation that creates inconsistencies within the policy. Consequently, the professional services exclusion does not exempt Penn from its duty to defend and indemnify RECSI against Hart's claims. Therefore, Penn's motion for summary judgment is denied, while RECSI's motion is granted, affirming that Penn must defend RECSI. The Court does not decide on the future obligation of Penn to indemnify RECSI, as that issue is not currently ripe. The case is now closed, although it is noted that the policy has an exclusion for damage to property owned, rented, or occupied by RECSI.