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Liberty Insurance Corp. v. WSP USA, Inc.

United States District Court, S.D. New York

June 27, 2018

LIBERTY INSURANCE CORPORATION, Plaintiff,
v.
WSP USA, INC., Defendant.

          OPINION AND ORDER

          J. PAUL OETKEN UNITED STATES DISTRICT JUDGE.

         Plaintiff Liberty Insurance Corporation filed this action against Defendant WSP USA, Inc. seeking a declaration that WSP's insurance policy does not obligate Liberty to defend WSP in a separate underlying lawsuit. Both parties have moved for summary judgment. For the reasons that follow, Liberty's motion is granted, and WSP's motion is denied.

         I. Background

         The following facts are taken from the parties' joint stipulation of facts and the operative complaint in the underlying action. These facts are undisputed unless otherwise noted.

         A. The Underlying Action

         In 2001, the Washington State Department of Transportation (“WSDOT”) hired WSP to evaluate the repair or replacement of the Alaskan Way Viaduct, a highway project in Seattle. (Dkt. No. 32-2 (“SOF”) ¶ 8.)[1] Among other things, WSP agreed to develop an environmental impact statement and to perform “associated design work” for the viaduct project. (SOF ¶ 9.) WSP subcontracted with an engineering and land surveying company, Shannon & Wilson (“S&W”), to “conduct extensive geotechnical and hydrogeological exploration, tests, and studies” in the viaduct project area. (SOF ¶¶ 10, 12.)

         In 2002, S&W, through its subcontractor, Holt Drilling, drilled and installed several water wells along the Alaskan Way Viaduct, including “Test Well # 2, ” which had an 8-inch diameter steel well casing. (SOF ¶ 13.) WSP and S&W then prepared several geotechnical reports associated with the viaduct project. (SOF ¶¶ 14, 28, 30.) Some of those reports were included in Washington's “Request for Proposal” package, in which the State sought a contractor to design, engineer, and construct a new bored tunnel to replace the Alaska Way Viaduct. (SOF ¶¶ 28, 33(d); STP AC ¶ 13.) But the reports failed to identify the 8-inch diameter steel well casing at Test Well #2 and incorrectly described Test Well #2 as having a “2-inch diameter PVC casing.” (SOF ¶ 33(d).)

         In 2011, WSDOT contracted with Seattle Tunnel Partners (“STP”) for design, engineering, and construction services on the new bored tunnel project. (SOF ¶ 29.) STP purchased a tunnel boring machine and began tunneling work in 2013. (Dkt. No. 32-3 (“STP AC”) ¶¶ 17, 26.) STP alleges that the machine struck the steel casing of Test Well # 2, which caused the damage to the machine. (SOF ¶ 33(i)-(k).)

         STP sued WSP in Washington state court for professional negligence, negligent misrepresentation, and indemnification, to recover for the damage to its machine. (STP AC at 1; SOF ¶ 34.) In its professional negligence count, STP alleges that WSP (1) failed to properly indicate the existence and nature of Test Well #2 in its geotechnical documents; (2) inadequately memorialized the nature and type of installation involved in Test Well #2; and (3) failed to remove or otherwise properly decommission the test well following its abandonment or disuse. (SOF ¶¶ 37-39.) STP's negligent misrepresentation count alleges that WSP did not act with reasonable care or competence in preparing its geotechnical baseline report, and that STP relied on inaccurate information in that report. (SOF ¶ 41.) The indemnification count alleges that WSP breached a “special duty to STP” by failing to provide information concerning Test Well #2 in the geotechnical baseline report. (SOF ¶ 43.)

         B. The Liberty Commercial General Liability Insurance Policy

         Liberty issued a commercial general liability insurance policy to WSP for the period from October 1, 2013, to October 1, 2014. (SOF ¶ 50.) Under the policy, Liberty has a duty to defend WSP against any suit seeking damages due to “property damage” if, and only if, the insurance “applies.” (SOF ¶¶ 52-53.) The policy contains a “professional liability” exclusion, which states: “This insurance does not apply to . . . ‘property damage' . . . arising out of the rendering or failure to render any professional services by you or on your behalf” with respect to “providing engineering, architectural or surveying services to others in your capacity as an engineer, architect or surveyor.” (SOF ¶ 54.) Professional services include: “[p]reparing, approving, or failing to prepare or approve, maps, shop drawings opinions, reports, surveys, field orders, change orders, or drawings and specifications, ” and “supervisory or inspection activities performed as part of any related architectural or engineering activities.” (SOF ¶ 57.) However, “construction contractor” services are explicitly excepted from the definition of professional services: “Professional services do not include services within construction means, methods, techniques, sequences and procedures employed by you in connection with your operations in your capacity as a construction contractor.” (SOF ¶ 57.)

         In February 2017, WSP gave Liberty notice of STP's suit. (SOF ¶ 59.) Liberty replied that the allegations were broad enough to trigger a duty to defend under the policy, with the caveat that the “primary coverage issue” would be whether the “general liability policy specifically excludes coverage for professional services.” (SOF ¶ 59.) Liberty reserved its rights under the professional-liability exclusion and agreed, subject to that exclusion, to contribute to WSP's defense in the STP action pending resolution of the question whether the policy actually applies. (SOF ¶ 60.)

         In June 2017, Liberty filed this action for declaratory judgment as to whether the STP action is excluded from coverage under the professional-liability exclusion. The parties now file competing motions for summary judgment.

         II. ...


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