NEW JERSEY APPELLATE DIVISION CONTINUES TO STRICTLY INTERPRET EXCLUSIONARY PROVISIONS IN COMMERCIAL GENERAL LIABILITY POLICIES

Under New Jersey law, it is well known that when the language of a policy is ambiguous, such that it supports two reasonable interpretations, one favorable to the insurer and one favorable to the insured.  New Jersey courts have interpreted such policies to find coverage.  Further, when an insurer alleges that an exclusionary provision of the policy applies, it bears the burden of establishing the applicability as it is evident that New Jersey courts have interpreted exclusionary provisions narrowly.

In Lane v. Tishman Construction Corp., 2007 WL 1062182 (App. Div. 2007), the Appellate Division recently decided that a “Professional Services” Exclusion under a Commercial General Liability (CGL) policy is inapplicable.  This insurance coverage dispute arose from an accident that occurred in October 2001, during the construction of the Borgata Hotel Casino and Spa (Borgata)  in Atlantic City.  The underlying action was brought by Frank Lane and his wife for injuries sustained by Lane while working on the Borgata project.  Lane sued the project manager, Yates/Tishman; the owner, Marina District Development Company (MDDC); a safety consultant, Safety and Quality Plus, Inc. (SQP); as well as several other subcontractors.  In terms of liability coverage, third-party and fourth-party declaratory judgment claims were filed.

For the Borgata Project, SQP contracted to provide Yates/Tishman and MDDC with “the knowledge, skills, ideas, experience and abilities” of Dwayne Carter, a site safety manager. The agreement provided in pertinent part that Mr. Carter would conduct inspections for items required by OSHA, daily inspections for compliance with OSHA regulations, and spot checks. The agreement required SQP to provide insurance during the performance of its services. It also required that Yates/Tishman and MDDC be named as additional insureds for general liability. The agreement further required SQP to “indemnify, defend and hold Yates/Tishman and MDDC harmless against and from all claims, damages judgments, fines, penalties and costs arising out of, or in connection with, the services.” In the underlying suit, an expert concluded that Mr. Carter was negligent in performing his duties as a site safety manager, contributing to Plaintiff’s injuries.

SQP was insured by Terra Nova Insurance Company (Terra Nova). The Terra Nova policy contained an exclusion entitled, “Professional Services Exclusion,” which provided: “This insurance does not apply to claims or any defense costs arising out of the provision of or the failure to provide professional services.” Further, there was no definition provided in the policy for professional services. In the insurance coverage action, Terra Nova argued that it was not obligated to provide coverage because Mr. Carter is a professional and as a result, the professional services exclusion applies.

In affirming the trial court’s decision, the Appellate Division found that Terra Nova’s CGL policy provided coverage to SQP because Mr. Carter was not performing professional services at the time of the accident. In its decision, the Appellate Division stated that Mr. Carter was basically a construction worker that had some additional OSHA training. Moreover, Mr. Carter’s training was more akin to general academic instruction, training, and apprenticeship as a construction supervisor or foreman rather than a professional who is paid a fee for specialized service.

In holding that the professional services exclusion did not apply, the Appellate Division further held that the policy’s exclusion was ambiguous. Because New Jersey Courts have held that insurance policies are contracts of adhesion and when ambiguous, should be viewed in a light most favorable to the insured, the Appellate Division interpreted the subject CGL policy to support coverage. As a result, because the policy lacked a clear definition of professional services, it would appear that the parties involved in the agreement intended that the exclusion cover only safety engineers. In this case, Mr. Carter was not an engineer as his title was that of safety manager.

The Appellate Division has once again made clear that ambiguous insurance policies, and exclusions therein, will be viewed in a light most favorable to the insured. As a result, the impact of this case further demonstrates the need for insurers to be specific in defining its policy exclusions in order to avoid providing coverage for which it originally did not intend.


Rey O. Villanueva, Esq.