A Philadelphia judge has ruled that an insurance company does not have the duty to defend a professional engineering firm on a storm relief tunneling project in a $10 million settlement of a bicyclist’s wrongful death claim.
Albert Childs died in 2007 after his bicycle was struck by a motor vehicle near the intersection of Kelly Drive and South Ferry Road in Northwest Philadelphia, in the area in which a subcontractor was performing work on the storm relief project, according to the opinion.
JPC Group, along with Jay Dee Contractors, had won the subcontractor bid with the city of Philadelphia on the storm relief project, according to the January 3 opinion by Philadelphia Court of Common Pleas Judge Patricia A. McInerney.
JPC-Jay Dee were subcontractors of the professional engineering firm CMX.
The judge determined that one of JPC’s insurers, North River Insurance, did not have to provide coverage because the primary coverage provided to JPC-Jay Dee by the Charter Oak Fire Insurance Co., as well as the coverage provided by Hartford Insurance to the professional engineering firm, had not been exhausted.
North River’s policy also excluded coverage for professional liability, the judge said.
According to the opinion, JPC Group entered a contract for commercial general liability insurance with Charter Oak Fire Insurance with a blanket additional insured endorsement that the judge construed as covering CMX; the policy does not cover professional liability.
Charter Oak defended the JPC-Jay Dee joint venture as well as the city of Philadelphia because of a contractual indemnity provision in the contract between the joint venture and the city, the opinion said.
The Childs lawsuit settled for $10 million, $9 million of which was paid for by North River, the opinion said.
According to the opinion, JPC Group also entered a contract for a commercial umbrella policy with North River Insurance with a blanket additional insured provision covering the JPC-Jay Dee joint venture; the policy also does not cover professional liability.
CMX, which provided professional engineering services, including all design submissions, on the project, also procured general liability insurance through Hartford Insurance, the opinion said.
CMX also procured a professional services liability policy covering architects and engineers through Lexington Insurance up to $10 million less a $250,000 self-insured retention, according to the opinion.
Lexington paid $2 million to the estate to satisfy any claim against CMX, the opinion said.
Hartford agreed to share in reasonable and necessary defense costs incurred after CMX gave notice of the lawsuit, but Hartford denied indemnity coverage because of a professional services exclusion within the policy, the opinion said.
“The North River policy specifically conditions its defense and obligations upon the exhaustion by payment of settlements and judgments of all ‘underlying insurance’ and ‘other insurance,’” the judge said.
“The record demonstrates CMX tendered its defense on October 20, 2009. Charter Oak did not pay its limit of indemnity until January 26, 2010. … The Hartford policy constituted ‘other insurance.’ Hartford, although agreeing to pay some defense costs, denied overage based on the engineers, architects or surveyors professional liability exclusion. In order for North River to provide a defense, Hartford would have had to exhaust its limits by payment of judgment or settlement.”
The judge also rejected Lexington’s allegations that North River owed CMX a duty of indemnification and that North River committed bad faith.
The Childs’ estate also sued the city of Philadelphia and project consultant Protection Services. The city’s contract with CMX required indemnification and that it be named as an additional insured on CMX’s insurance policies, and CMX’s contracts with JPC-Jay Dee required that it be named as an additional insured on JPC-Jay Dee insurance policies.
CMX tendered the defense of the lawsuit to JPC-Jay Dee’s insurers, Charter Oak and North River.
CMX, which was replaced as a plaintiff in the insurance lawsuit by Lexington, stopped the lawsuit against Charter Oak.
The case is on appeal to the state Superior Court by Lexington Insurance Co.
North River Insurance’s counsel, Wendy Koch of Koch & DeMarco in Jenkintown, Pa., did not respond to a request for comment.
Lexington’s lawyers at Pietragallo Gordon Alfano Bosick & Raspanti had no comment.
(Copies of the 14-page opinion in Lexington Insurance v. Charter Oak Fire Insurance, PICS No. 13-0143, are available from Pennsylvania Law Weekly. Please call the Pennsylvania Instant Case Service at 800-276-PICS to order or for information.) •