Evanston Insurance Company v. AJ's Electrical Testing & Services LLC, 1:15-cv-01843

Background

Evanston Insurance filed a declaratory-judgment action seeking a ruling that its primary and excess liability policies do not require defense or indemnity for Southern Substation in two state-court suits arising from arc-flash explosions during circuit-breaker testing.
The insured, Southern Substation (Florida LLC), had been subcontracted to perform an arc-flash hazard analysis and training; the alleged injuries resulted from services performed in June 2014.
Evanston's Liability and Excess policies contain broad professional-liability exclusions that bar coverage for claims "arising out of the rendering of or failure to render professional services."
Southern Substation moved for summary judgment seeking a declaration of coverage; Evanston opposed, submitting expert affidavit/report from an electrical engineer (Lee Metz) opining that arc-flash analyses should be performed by a registered professional engineer.
Choice-of-law: Court applied South Carolina choice-of-law rules and concluded Florida law governs the insurance policies because the insured and policies originated in Florida.
The central factual dispute is whether the arc-flash analysis/training were "professional services" within the meaning of the policy exclusions; the court considered admissibility of the expert under Daubert and Rule 56 and found the expert admissible.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether Florida or South Carolina law governs interpretation of the policies	South Carolina procedural rules apply but policies were issued in Florida; Florida law should govern substantive issues	South Carolina law or its statute could apply, but defendants argued choice doesn't change outcome	Court applied South Carolina choice-of-law rules and held Florida law governs the substantive issues because policies were formed and insured are Florida-based
Whether arc-flash analysis/training are "professional services" excluded from coverage	Expert Metz opines such analyses require interpretation by a registered professional electrical engineer; industry standards and regulations support classifying the service as professional	Southern Substation argues work is data collection/testing not a professional service; employees need not be licensed; analogizes to Aerothrust	Court found a genuine dispute of material fact exists — reasonable factfinder could conclude services were professional; denied summary judgment for defendants
Admissibility/use of Evanston's engineering expert evidence at summary judgment	Expert affidavit and report meet Rule 56(e) and Daubert; methodology and qualifications appropriate	Defendants contended report was inadmissible (initially unsworn) and relied on hearsay/software license terms	Court ordered and accepted sworn affidavit; applied Daubert/Rule 703 and considered the expert admissible and properly considered on summary judgment
Whether declaratory relief is appropriate at this stage	Evanston seeks an advance coverage determination to clarify obligations and resolve uncertainty	Defendants argued issues of fact preclude declaratory relief in their favor on summary judgment	Court exercised jurisdiction under 28 U.S.C. § 2201, found factual disputes precluded granting defendants summary judgment, and denied defendants' motion

Key Cases Cited

Wilton v. Seven Falls Co., 515 U.S. 277 (U.S. 1995) (Declaratory Judgment Act confers discretionary authority to federal courts)
Nautilus Ins. Co. v. Winchester Homes, 15 F.3d 371 (4th Cir. 1994) (declaratory judgments appropriate to resolve insurance coverage disputes)
Anderson v. Liberty Lobby, 477 U.S. 242 (U.S. 1986) (summary judgment standard — materiality and reasonable factfinder test)
Daubert v. Merrell Dow Pharm., 509 U.S. 579 (U.S. 1993) (standards for admissibility of expert testimony)
Aerothrust Corp. v. Granada Ins. Co., 904 So. 2d 470 (Fla. Dist. Ct. App. 2005) (professional-exclusion analysis; inspection services not necessarily professional)
Auto-Owners Ins. Co. v. E.N.D. Servs., [citation="506 F. App'x 920"] (11th Cir. 2013) (home-inspection services held within "professional services" exclusion; factors for assessing professional nature of services)