217 A.3d 528
Vt.2019Background
- Integrated Technologies, Inc. (ITI), an engineering/project‑management firm, was insured under an Errors & Omissions (E&O) policy issued by Crum & Forster for 2014–2016.
- The GOAD Company sued ITI in Missouri, alleging breach of a teaming agreement, breach of a commission agreement, tortious interference with business expectancy, and injurious falsehood based on ITI’s conduct with Honeywell (inducing Honeywell to replace GOAD as a subcontractor).
- Crum denied coverage and declined to defend; ITI settled the GOAD case and sued Crum for breaching its duty to defend under the E&O part.
- The E&O policy covered damages from a “wrongful act,” defined as an ‘‘act, error or omission in the rendering or failure to render ‘professional services,’’’ where ‘‘professional services’’ are functions related to ITI’s practice as a consultant, engineer, or construction manager.
- The trial court granted summary judgment to Crum, finding GOAD’s allegations did not potentially fall within the E&O coverage because they alleged intentional business torts and contract breaches, not professional malpractice.
- ITI appealed, arguing the policy language is broad (covers acts as well as errors/omissions and anything “related to” professional practice) and that GOAD alleged facts (recklessness; false statements) that could state covered claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Crum had a duty to defend under the E&O policy | ITI: GOAD alleged acts/errors related to ITI’s professional services (selection/management of subcontractors, strategic input to Honeywell), so claims potentially fall within E&O coverage | Crum: GOAD alleges intentional business torts and contract breach—not acts inherent to providing professional services—so no duty to defend | No duty to defend; summary judgment for Crum |
| How to read “professional services” / “related to” in E&O context | ITI: “related to” should be read broadly (any nexus to professional activity suffices) | Crum: E&O covers only services involving specialized learning unique to the profession; “related to” is limited by that purpose | Court adopts limiting construction: professional services require application of specialized skill unique to the profession |
| Whether GOAD’s breach‑of‑contract and tort claims arise from professional malpractice | ITI: Some allegations (reckless conduct, false statements) could be non‑intentional or tied to professional advice and thus covered | Crum: Claims arise from business decisions and intentional misconduct aimed at displacing GOAD, not from malpractice in rendering services | Claims do not arise from acts/errors in rendering professional services; they are business/intentional torts outside E&O coverage |
| Whether alleged recklessness/knowledge issues create triable coverage questions | ITI: Allegations that ITI acted with reckless disregard or knew statements were false raise factual issues that preclude summary judgment | Crum: Even assuming recklessness, the gravamen is intentional business misconduct not professional error, so exclusion/intent issues need not be reached | Court: No need to reach exclusions or intent questions because claims fall outside the insuring clause; summary judgment affirmed |
Key Cases Cited
- Crum & Forster Managers Corp. v. Resolution Tr. Corp., 620 N.E.2d 1073 (Ill. 1993) (E&O policies are specialized; coverage limited to risks inherent in rendering professional services)
- Utica Mut. Ins. Co. v. Herbert H. Landy Ins. Agency, Inc., 820 F.3d 36 (1st Cir. 2016) (touchstone is whether wrongful act is inherent in professional practice; distinguishes professional acts from ordinary business decisions)
- Massamont Ins. Agency, Inc. v. Utica Mut. Ins. Co., 489 F.3d 71 (1st Cir. 2007) (breach of exclusivity/diversion of business is not a professional service; mere causal or attenuated connections to professional tasks are insufficient)
- Shelton v. American Ins. Co., 507 So. 2d 894 (Miss. 1987) (fraudulent statements to induce a contract are not covered by a professional services liability policy)
- Albert J. Schiff Assocs., Inc. v. Flack, 417 N.E.2d 84 (N.Y. 1980) (discusses limits of professional services coverage)
- Bagley v. Monticello Ins. Co., 720 N.E.2d 813 (Mass. 1999) (duty to defend depends on whether plaintiff’s injury originates from the insured’s professional service or an independent business tort)
- Roe v. Federal Ins. Co., 587 N.E.2d 214 (Mass. 1992) (common‑sense guide in differentiating covered professional malpractice from uncovered business torts)