Orchard, Hiltz & McCliment, Inc. v. Phoenix Insurance Co., 676 F. App'x 515

Background

In 2011 the Village of Dexter hired engineering firm Orchard, Hiltz & McCliment, Inc. (OHM) to design and oversee upgrades to a wastewater treatment plant, including design, contract administration, construction observation, and on-site supervision.
Prime contractor A.Z. Shmina, Inc. (Shmina) contracted with subcontractor Platinum Mechanical (Platinum), which subcontracted Regal Rigging to remove two digester lids.
During removal, an explosion killed a worker (Koch) and injured another (McBride); both sued OHM alleging negligent engineering, supervision, and failure to plan for safe lid removal.
Shmina had a CGL policy from Phoenix with an additional-insured endorsement that excludes claims "arising out of" professional architectural/engineering services; Platinum had a CGL policy from Federated with a similar additional-insured endorsement and professional-services exclusion.
OHM’s professional insurer defended the underlying suits; OHM sued Phoenix and Federated seeking declaratory judgment that they must defend and indemnify OHM. The district court held OHM was an additional insured under Phoenix but that both policies’ professional-services exclusions barred coverage; Sixth Circuit affirmed.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
1. Is OHM an additional insured under Federated?	OHM says yes (agreement implied by contracts and prime contract requirements).	Federated says no written agreement adding OHM exists; OHM not covered.	Court assumed coverage for purposes of decision but found no genuine dispute would change exclusion outcome (did not decide affirmatively).
2. Do the policies’ professional-services exclusions bar coverage for the underlying claims?	OHM contends underlying allegations largely concern general construction and safety (non‑professional acts) for which CGL should apply.	Insurers argue claims arise from OHM’s professional design, supervision, inspection, and approval duties, so exclusions apply.	Held: Exclusions apply; underlying allegations concern professional services (specialized, intellectual acts or acts reasonably related thereto), so no duty to defend/indemnify.
3. Must Phoenix pay a pro rata share of defense if later liable?	OHM argues Phoenix should share costs if found liable because OHM was an additional insured under Phoenix.	Phoenix cross‑appealed district court’s pro rata allocation.	Court declined to reach Phoenix’s cross‑appeal because exclusional ruling made it unnecessary; district court’s conditional pro rata requirement left intact as moot on appeal.
4. Does applying the exclusions render coverage illusory?	OHM argues broad exclusions make CGL coverage illusory because professional claims never trigger coverage.	Insurers respond coverage still available for non‑professional negligence claims not arising from professional services.	Held: Not illusory — coverage may still be triggered for ordinary negligence claims outside professional services; exclusions validly applied here.

Key Cases Cited

Celotex Corp. v. Catrett, 477 U.S. 317 (summary judgment standard) (explains burden on movant at summary judgment)
Erie R.R. Co. v. Tompkins, 304 U.S. 64 (choice-of-law principle governing federal courts applying state law)
Auto-Owners Ins. Co. v. Churchman, 489 N.W.2d 431 (Mich. 1992) (insurance contracts interpreted as ordinary contracts; courts bind to clear policy language)
Am. Bumper & Mfg. Co. v. Hartford Fire Ins. Co., 550 N.W.2d 475 (Mich. 1996) (duty to defend broader than duty to indemnify)
Buczkowski v. Allstate Ins. Co., 526 N.W.2d 589 (Mich. 1994) (coverage determined first, then exclusions applied)
Shuler v. Mich. Physicians Mut. Liab. Co., 679 N.W.2d 106 (Mich. Ct. App. 2004) (professional service defined by nature of act, not title)
Centennial Ins. Co. v. Neyer, Tiseo & Hindo, Ltd., 523 N.W.2d 808 (Mich. Ct. App. 1994) (acts preliminary to professional services fall within professional exclusion)