No Coverage For Fatal Explosion, Insurers Tell 6th Circ. Insurers had a duty to defend or indemnify plaintiff, however, because there was no dispute of material fact that the professional services exclusion in both policies barred coverage.
A pair of insurers urged the Sixth Circuit on Thursday to uphold a ruling that they don't have to defend a project engineering firm in a lawsuit over a fatal explosion at a wastewater treatment plant where it supervised upgrades, asserting that an exclusion for claims stemming from the firm's professional services clearly bars coverage.
Phoenix Insurance Co. and Federated Insurance Co. argued in separate briefs filed with the appellate court that U.S. District Judge Marianne Battani properly concluded that the professional services exclusion in their policies applied to bar coverage for engineering firm Orchard Hiltz & McCliment Inc.
OHM, which was supervising upgrades at the wastewater treatment plant at the time of the deadly explosion, argued in an opening appellate brief that the exclusion doesn't apply because not all of the underlying claims dealt with alleged deficiencies in OHM's performance of professional engineering services. But the insurers both countered that none of the claims can be divorced from OHM's professional responsibilities.
"There was no theory of liability alleged against OHM in the underlying actions which would fall outside of OHM, as the project engineer and architect, performing professional services," Federated contended in its brief.
The incident that kicked off the coverage dispute occurred while OHM was overseeing design upgrades to a wastewater treatment plant in the village of Dexter, Michigan, for which A.Z. Shmina Inc. was the general contractor.
Shmina obtained an insurance policy from Phoenix, with OHM named as an additional insured. At one point, Shmina subcontracted Platinum Mechanical Inc. to work on the project, and Platinum obtained a policy from Federated that covered it and Shmina as an additional insured.
In April 2013, Platinum employee Michael Koch was killed and another employee was seriously injured when their torch ignited the methane gas inside a digester tank at the plant. An OHM engineer was on-site at the time, and OHM was named in the two ensuing lawsuits in Michigan state court.
After Phoenix and Federated denied coverage, OHM sued in Michigan federal court in an effort to force the insurers to fund its defense.
In November, Judge Battani granted the two insurers' motions for summary judgment. The judge found that the professional services exclusion in Phoenix’s policy precluded coverage of any incident stemming from its professional engineering or supervising services, and further determined that the incident reasonably related to OHM supervisory duties.
As for the coverage OHM claimed it was owed under Federated’s policy, Judge Battani said the only additional insured under that policy was the project’s general contractor, Shmina, and not OHM, and that therefore coverage didn’t exist. In any event, the professional services exclusion in the Federated policy would also bar coverage, the judge found.
Federated said in its Sixth Circuit brief that Judge Battani made the right call on both counts. According to the insurer, OHM failed to show that Platinum was required to obtain additional-insured coverage for the firm.
Moreover, all of the duties that OHM allegedly breached pertained to its specialized engineering knowledge and skill, so the professional services exclusion applies, Federated said.
"The village didn't employ just anyone to observe and report on project operations, attend progress meetings and interact with the general contractor to make sure that the project ... was properly proceeding," the insurer argued.
Phoenix advanced similar arguments regarding the exclusion in its brief.
"Overseeing and monitoring the implementation of one’s engineering plans, specifications and designs and acting as an on-site consultant, all of which OHM did here and which contributed to the injuries, are professional engineering services for purposes of this provision under Michigan law," Phoenix said.
OHM is represented by Michelle A. Thomas, Gregory I. Thomas and Michael F. Healy of Thomas DeGrood & Witenoff PC.
Phoenix is represented by Michele A. Chapnick of Gregory & Meyer PC.
Federated is represented by Megan K. Cavanagh and John J. Gillooly of Garan Lucow Miller PC.
The case is Orchard Hiltz & McCliment Inc. v. Phoenix Insurance Co., case number 16-1176, in the U.S. Court of Appeals for the Sixth Circuit
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Howell worker injured in Dexter explosion files lawsuit against contractors
By John Counts
The Dexter Utilities Department wastewater treatment plant.
John Counts | AnnArbor.com
David McBride
Courtesy of Bill McHenry
The 23-year-old Howell man injured in an April explosion that killed another worker at a Dexter wastewater treatment plant on Thursday filed a lawsuit against the contractors.
The suit, filed in the Washtenaw County Trial Court, claims David McBride wasn’t warned methane gas was present in the area where he was using a blowtorch, which caused the explosion.
“It is inconceivable in this day and age that engineers and experienced general contractors would allow cutting operations with torches to go on for nearly two days on a digester loaded with raw sewage and highly explosive methane gas,” McBride’s attorney, Bill McHenry, said in a released statement. “This is not rocket science. This tragic accident should have never happened.”
McBride suffered serious head injuries and hasn’t yet returned to work, McHenry said.
The suit states McBride was cutting bolts on the lid of a digester, one of two large tanks used for collecting and processing sewage at the Village of Dexter’s Wastewater Treatment Plant, when the torch he was using ignited the methane gas and caused the explosion.
“(McBride) was launched into the inside of the rim of the digester, resulting in horrific and permanent injuries including, but not limited to, traumatic brain injury,” the suit claims.
Michael Koch a supervisor with Platinum Mechanical, Inc., was killed in the blast. The 48-year-old Brooklyn, Mich. man was working alongside McBride on top of the lid.
The defendants listed in the suit are the general contractor, A.Z. Shmina, Inc., and the two sub-contractors, Platinum Mechanical, Inc. and Orchard, Hiltz & McCliment, Inc.
McBride worked for Regal Recycling, Inc., a Howell-based salvage company that was called in to scrap the lids of the digesters. McHenry said the contractors who hired McBride should have known the digesters were still filled with methane-emitting sludge and not allowed the him to use a torch trying to remove the lids.
“The people in charge of the site should have known that the digester was still full of sewage,” McHenry said. “(The contractors) never in a million years should have allowed torches.”
The suit lists three counts of negligence and gross negligence, one count against each of the contractors.
The Village of Dexter awarded A.Z. Shmina, Inc. the $3.3 million contract to renovate the wastewater treatment plant in July 2012.
Work has continued at the plant since the explosion. The lid of the primary digester has since been removed and may be responsible for a foul odor in Dexter until a new lid can be put in place, AnnArbor.com reported Thursday.
The treatment plant contains two digesters, a smaller, primary digester that mixes and heats the sludge to help break it down and a larger digester used mainly for storage. The current lids date back to the 1970s and were not functioning properly, making them very inefficient, AnnArbor.com has reported.
Back in April, McBride had cut the bolts off the secondary digester the day before the explosion without incident. He was working with the blowtorch on the primary digester when the flame ignited the methane, McHenry said.
“He’s still recovering,” the attorney added. “The kid wants to get back to work. He’s young, he’s strong, he’s healthy, but he’s suffered a serious head injury.”
The suit requests an undisclosed amount more than $25,000, the minimum for a case to appear in circuit court.
A spokesperson for Platinum Mechanical, Inc. declined to comment about the lawsuit when reached by phone Friday. Messages were left with A.Z. Shmina, Inc. and Orchard, Hiltz & McCliment, Inc.
The explosion is still under investigation by the Michigan Occupational Safety and Health Administration.
Comments
Bcar
Mon, Jun 24, 2013 : 11:16 a.m.
"This is not rocket science. This tragic accident should have never happened." Yeah, like a welder/cutter knowing the environment they're cutting it... Some of this should be on him as well.
msrock1954
Sat, Jun 22, 2013 : 7:46 p.m.
They make portable gas detectors for these kinds of situations, and it appears one was not used which is tragic as it may have prevented this ! Anybody in the waste water profession knows better!
maallen
Sun, Jun 23, 2013 : 4:18 a.m.
But Nicholas Urfe, I thought you said the gas wasn't contained/captured?
Nicholas Urfe
Sat, Jun 22, 2013 : 8:22 p.m.
This went on for two days. It is possible the gas levels varied due to wind conditions, etc. Or maybe as the bolts were cut, gas that was previously contained escaped.
maallen
Sat, Jun 22, 2013 : 6:07 p.m.
Yes, methane gas is odorless, but in operations like these Mercaptan is used to make it produce a smell so one knows if there is methane gas present or not. If you had read the article closely it states "the lid of the primary digester has since been removed and may be responsible for a foul odor in Dexter until a new lid can be put in place." And Nicholas Urfe, Platinum Mechanical, Inc is a unionized company, along with A.Z. Shmina. To say "Unions often prevent these types of accidents" is simply factually wrong and misleading. I am curious to know why Regal Recycling isn't being sued, afterall that is who David McBride is employed by. I am wondering if there isn't money in Regal Recycling?
Bummer
Fri, Jun 28, 2013 : 10:21 p.m.
"Yes, methane gas is odorless, but in operations like these Mercaptan is used to make it produce a smell so one knows if there is methane gas present or not." uh, no. you're thinking of natural gas and propane. not methane that may or may not be present in a wwtp.
maallen
Sun, Jun 23, 2013 : 4:15 a.m.
Thanks Colorado Sun--that explains why. Nicholas Urfe---you just talked yourself into a pretzel.
Colorado Sun
Sun, Jun 23, 2013 : 2:19 a.m.
"I am curious to know why Regal Recycing isn't being sued." State law limits the injured worker to a claim for workers' compensation benefits as the exclusive remedy against his employer.
Nicholas Urfe
Sat, Jun 22, 2013 : 8:21 p.m.
The sewage smells. The people in dexter smell sewage, not mercaptan. Mercaptan is typically added to the *captured* gas. This was gas that wasn't captured. Mercaptan isn't added to the sewage in the tank.
Nicholas Urfe
Sat, Jun 22, 2013 : 12:56 p.m.
As another poster suggested, Unions often prevent these types of accidents. They tend to protect workers who refuse to work based on safety issues, have questions about safety, or issues where short-cuts are being taken. If companies violate safety rules that put people at risk, unions are more likely to draw attention to those violations. An individual worker who questions safety often isn't kept around for long. Of course we don't yet know what happened here.
Nicholas Urfe
Sat, Jun 22, 2013 : 12:45 p.m.
"Why didn't the workers question their safety before doing the work.." Maybe they did. Maybe they were screamed at to do the job or find another. Maybe they were told the tank had been sufficiently vented, or there was enough wind. We don't know.. yet. What is the company doing for the injured employee? Anything? We don't know whether the company had insurance of any kind, or if the employees did. Are the survivors of the deceased are getting anything? Does the injured man have any disability insurance? But right now he can't work, and he surely has bills to pay. It sounds like he needs physical therapy and other treatment. Most creditors don't care or want to hear about your disability or job issues. Workers comp isn't automatic. It sometimes involves a lengthy fight just because the insurance company wants to fight and drag it out - even if they don't show up to court hearings that they requested. That happened to a family member.
msrock1954
Sat, Jun 22, 2013 : 12:38 p.m.
Where were thee employees at the WWTP when this open flame cutting was occurring? This kind of thing is stressed very heavily when studying and obtaining State Certification for WWTP operating licenses. At the WWTP I worked at there were signs prominently displayed warning about methane and open flames! This kind of event should never have occurred had proper safety procedures been followed, which to me indicates failures on many levels!
huh7891
Sat, Jun 22, 2013 : 11:27 a.m.
The whole story is sad..a man lost his life and another injured. It's interesting though, when I first heard about the explosion and where it took place methane gas came to mind immediately. Why didn't the workers question their safety before doing the work...and I would think the employer would be looking out for them too.
windjmar
Sat, Jun 22, 2013 : 6:38 a.m.
The people that bid the job most certainly held themselves to be the expert's in this area of repairing or replacing sewage containers. It is so unfortunate that a young kid is permanently injured and another man killed. The workers lose their lives while the CEOs/owners rake in the big dough-even if they are small companies. Nothing new here -- are any of these workers in unions i wonder? That's why unions were formed to protect things like this from happening -- and if they don't. sue them up big-time! But what will millions of dollars do for you when you are brain damaged 'cept hire someone to take care of you. especially when you are older. Hopefully the lawyer will know enough to look at the description of the job that was posted by the township when they solicited bids, because he should have had them in the lawsuit as well -- perhaps the township was grossly negligent in the selection of these companies. Important to see why these companies were hired in the first place -- friends, relatives, straw-man owners?
a2citizen
Sat, Jun 22, 2013 : 12:51 a.m.
Hindsight is 20-20 but OSHA should probably require that ALL waste facilities post signs warning of the possible presence of explosive gasses.
Jim Osborn
Sat, Jun 22, 2013 : 12:20 p.m.
Bob, R U joking? How can you know if a warning sign helped to avoid a tragedy? If a sign had been posted that stated that methane gas is oderless and exposive, it might have prevented this. No guarentee, but not 100% that the same resutl would have happened, either. A sign might have solictied questions, especially from the now dead supervisor. I thought that you could smell methane. Rotten eggs. Now I know better.
Basic Bob
Sat, Jun 22, 2013 : 1:19 a.m.
Posting warnings is no substitute for proper work instructions before potentially hazardous work is performed. Warning signs never prevented death or serious injury.
Nicholas Urfe
Fri, Jun 21, 2013 : 9:43 p.m.
Sad that people are calling the lawyer greedy. A man was killed and another man was severely injured, possibly permanently. Definitely needlessly. Methane is an odorless gas. The experts in methane production from sewage probably should have warned the guys that the tank continuously emitted explosive concentrations of gas. The torch is the quick and cheap way to do the job. Quick = more profit. But someone didn't tell the worker-bees that this job was dangerous and the quick way would not be safe. One wonders who knew? The court case should surface the facts.
Tesla
Sat, Jun 22, 2013 : 1:41 a.m.
He never used th word greedy and when you say "People" thats plural meaning more than one.
Nicholas Urfe
Sat, Jun 22, 2013 : 1:21 a.m.
Maybe you should read the comments before replying. Specifically the one right before mine. @Dave: "Sounds like a lawyer read this on here and ran over to the hospital to pick up the suit. Not cool. "let me sue you because my client didn't know methane was explosive."
Tesla
Sat, Jun 22, 2013 : midnight
Speaking of "Facts" Where do you see anyone calling the lawyer greedy? The word greedy isn't even used in a single comment or reply and no one even suggested it. Get YOUR facts right.
Dave
Fri, Jun 21, 2013 : 9:19 p.m.
Sounds like a lawyer read this on here and ran over to the hospital to pick up the suit. Not cool. "let me sue you because my client didn't know methane was explosive."
Nicholas Urfe
Sat, Jun 22, 2013 : 2:17 p.m.
@Dave: How much do you think those hospital bills are? Who is paying them? How does this guy support his family and make his car and house payments while he is sidelined with a traumatic brain injury, and other permanent injuries? Who pays for his physical therapy and when does it begin? Who coordinates that given the report that he has a brain injury and may not be able to think straight? You seem to be blaming the victim here, and also criticizing him for getting rapid help to put his shattered life back together. Is he just supposed to sit in the hospital and hope someone helps him, pays his bills and takes care of his family? For all we know he was told the tank was not explosive because it was a windy day. Or that it was vented. Etc.
jcj
Sat, Jun 22, 2013 : 12:44 a.m.
johnnya2 I am very much against frivolous lawsuits. BUT you are spot on on this one.
johnnya2
Fri, Jun 21, 2013 : 11:51 p.m.
NO, the suit says HE DID NOT KNOW THERE WAS METHANE. "The people in charge of the site should have known that the digester was still full of sewage," is EXACTLY what he said. I am sure Mr McBride would have no way of knowing there was still sewage there, that is not what he is paid to know.
Jack Gladney
Fri, Jun 21, 2013 : 9 p.m.
"This is not rocket science." I agree. It's more like seventh or eight grade physics, which seems to make the attorney's comment an odd admission of a mitigating factor. My dad used to ask us as kids, "If someone told you to jump off a bridge..."
Basic Bob
Sat, Jun 22, 2013 : 1:14 a.m.
Worker beware? I don't think so, Jack.
jcj
Sat, Jun 22, 2013 : 12:42 a.m.
Jack How long does it take to teach a kid to use a cutting torch? How long does it take to teach a kid how many ways there are to be injured while using a cutting torch? By your standards a freshman in High school would be expected to know better. How ridiculous!
johnnya2
Fri, Jun 21, 2013 : 11:49 p.m.
So EVERy person who ever does anything that may cause an explosion needs to check for themselves if there is methane around? The fact is, the DEFAULT position should be there is NO methane. If there is, it is the issue off the contractor to inform the workers. I am always amazed at right wingers and their blame the worker mentality. He was paid to do a job. He did the job the way the COMPANY demanded he do it at the time of their choosing. He was not allowed to run tests or determine off there was methane. THAT IS NOT HIS JOB.
MI4Me
Fri, Jun 21, 2013 : 9:52 p.m.
For all we know, he was told the site was cleared and no methane issue was present.
zip the cat
Fri, Jun 21, 2013 : 8:46 p.m.
What part of using common cense don't you understand?
jcj
Sat, Jun 22, 2013 : 12:38 a.m.
Who are you referring to? Common sense is something that does not apply to everything. Would it be "common sense" to know that eating Foxglove can cause the following in your pet? Cardiac arrhythmia, vomiting, diarrhea, weakness Would it be "common sense" to know how many days it takes a tomato to ripen? Some things are learned that's why there is training!
Nicholas Urfe
Fri, Jun 21, 2013 : 8:53 p.m.
This was all completely censeless.
Momma G
Fri, Jun 21, 2013 : 8:32 p.m.
It's sad that this person feels the need to sue, when if, fully trained, he wouldn't have been using that "torch" at that sight to begin with. Praying for healing so we don't have, yet, another person on disability.
Basic Bob
Sat, Jun 22, 2013 : 1:12 a.m.
The first rule of safety is that all accidents are preventable. The way that is achieved is training. It is the employer's responsibility to provide that training so people don't die or suffer permanent injuries. The "hot wrench" is an acceptable way to remove stuck bolts or cut through steel covers. But this kind of "hot work" should not be performed in an explosive atmosphere. I'm sure the worker was trained to know this basic safety fact, but he was not informed that he was working under those conditions. Management fail. Worker lose.
jcj
Sat, Jun 22, 2013 : 12:29 a.m.
Your wrong on this one Momma! You/we can't expect that every employee is going to have knowledge in all dangerous situations. That knowledge comes with years of experience or training. That is why it is the employers responsibility to inform and train employees.
johnnya2
Fri, Jun 21, 2013 : 11:45 p.m.
Are you serious? How would this young man know there was methane? It is incumbent on the EMPLOYER (contractor) to let the people doing the work know what is going on. THIS is what happens when bids are given to the lowest bidder without having standards.
Dennis
Fri, Jun 21, 2013 : 10:36 p.m.
It's sad that when a young kid who did what his employer instructed him to is injured on the job, people want to blame him, or act like he should have known better. The kids supervisor was standing right next to him. Yeah, the kid should have had better training but it is the responsibility contractor(s) to make sure their employees comply with OSHA and MIOSHA, not the other way around.
MI4Me
Fri, Jun 21, 2013 : 9:51 p.m.
It's sad he was injured, but this is the correct way to handle the issue. Otherwise we come to people with guns going for their own retribution. I agree it pays to pay attention to ones surroundings when working and never assume someone else thought of the safety issues - you cannot fix being dead. However, in terms of liability and on whom the responsibility falls for clearing a burn permit or setting work rules to require one - it is the employer. I don't know about this situation, but jobs I have been on require burn permits from safety before firing up any open flame. Without safety saying go ahead, or someone of authority in lieu of safety, never fire up. Work rules are good.
OLDTIMER3
Fri, Jun 21, 2013 : 8:17 p.m.
It is called a CUTTING TORCH not a blowtorch.
Nicholas Urfe
Fri, Jun 21, 2013 : 8:51 p.m.
It blew up. So blowtorch is more appropriate.
kmgeb2000
Fri, Jun 21, 2013 : 7:46 p.m.
I'm sorry but David needed to warned about methane at a WWTP? Not that I disagree with the case, as a health and safety plan should have covered this. But self-preservation should stepped in at some point. Maybe someone should been been awake during science class.
Jim Osborn
Sat, Jun 22, 2013 : 12:14 p.m.
I'm surprised that the lawyer or owner who signed the contract was not wise enough to inquire about methods and ensure that proper ones were used. There is so much fault to spread around. If methane is oderless, then I can see how a mistake could have been made. I would have thought that one of the Dexter plant folks would have specified that methane is dangerous when the demolation contract was awarded and the word passed down.
An Arborigine
Fri, Jun 21, 2013 : 8:32 p.m.
how about an exhaust fan?
Basic Bob
Fri, Jun 21, 2013 : 8:03 p.m.
where was the management and safety training? it can never be assumed that a subcontractor's employees are trained or aware of the hazards.
Reverend Bubba X
Fri, Jun 21, 2013 : 7:58 p.m.
Sorry, but Michigan Occupational Safety and Health Act requires that an employer protect employees from hazards causing or likely to cause death or serious physical harm. Perhaps someone should understand their legal and moral responsibilities as an employer?
julieswhimsies
Fri, Jun 21, 2013 : 7:43 p.m.
I understand why this young man is suing. But he's suing the man who died?!
John Counts
Fri, Jun 21, 2013 : 8:02 p.m.
Revered Bubba X is correct. The suits lists Platinum Mechanical Inc. as a defendant. Koch worked for the company. Sentences have been reworded to avoid any confusion.
Reverend Bubba X
Fri, Jun 21, 2013 : 7:56 p.m.
He suing the contractor who employed Michael Koch, the man who was killed, not the man. "Michael Koch of Platinum Mechanical, Inc., one of the contractors named in the suit, was killed in the blast."
===========
NOT RECOMMENDED FOR PUBLICATION
File Name: 17a0047n.06
Nos. 16-1176, 16-1231
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
ORCHARD, HILTZ & MCCLIMENT, INC.,
Plaintiff-Appellant/Cross-Appellee,
v.
PHOENIX INSURANCE CO.,
Defendant-Appellee/Cross-Appellant,
and
FEDERATED MUTUAL INSURANCE
COMPANY,
Defendant-Appellee.
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)
)
)
)
)
)
)
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)
)
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ON APPEAL FROM THE
UNITED STATES DISTRICT
COURT FOR THE EASTERN
DISTRICT OF MICHIGAN
BEFORE: GUY, CLAY, and GRIFFIN, Circuit Judges.
GRIFFIN, Circuit Judge.
In this declaratory judgment action, plaintiff Orchard, Hiltz & McCliment, Inc. seeks a
judgment requiring defendants Phoenix Insurance Company and Federated Mutual Insurance
Company to defend and indemnify it in two underlying tort actions. Plaintiff appeals the district
court’s grant of summary judgment in favor of defendants. Most contested is whether the
Phoenix and Federated insurance policies’ professional services exclusions bar coverage. We
affirm the judgment of the district court because liability coverage is precluded in this case.
Nos. 16-1176/1231, Orchard, Hiltz & McCliment v. Phoenix Ins. Co., et al.
-2-
I.
In 2011, the Village of Dexter, Michigan (“Dexter”), hired engineering and architecture
firm Orchard, Hiltz & McCliment, Inc. (“OHM”) to oversee upgrades to its wastewater treatment
plant’s sludge-handling system. The project included a design phase and a construction phase.
During the course of the project, Dexter approved three OHM proposals for “professional
engineering services.” Initially, OHM agreed to prepare all contract and design documents for
the project including all “architectural, structural, process, plumbing, heating and ventilation,
electrical and instrumentation drawings and technical specifications” for the general contractor,
and a schedule for completing construction work. OHM also agreed to conduct a quality
assurance and control review of all drawings and specifications.
During the construction phase, OHM was responsible for “contract administration,
construction engineering, construction observation, and construction staking.” Among other
duties, OHM agreed to provide daily observation of “significant construction work or testing,”
prepare daily field reports, and check completed work for “compliance with contract
documents.” Moreover, OHM conducted progress meetings with Dexter staff and the project’s
general contractor and subcontractors, and reviewed and approved all shop drawings. Finally,
when Dexter staff became concerned the project was falling behind schedule, OHM proposed
that engineer Chris Nastally “provide . . . additional services” by monitoring and documenting
the general contractor’s activities at the construction site full time. Dexter approved.
Dexter hired nonparty A.Z. Shmina, Inc. (“Shmina”) as the project’s general contractor.
Dexter’s contract with Shmina (the “prime contract”) designated OHM as the project engineer
and Dexter’s representative on the project. Under the prime contract, Shmina had to maintain
liability insurance to “protect [Shmina], the [Village of Dexter], and Orchard, Hiltz
Nos. 16-1176/1231, Orchard, Hiltz & McCliment v. Phoenix Ins. Co., et al.
-3-
& McCliment, Inc., Consulting Engineers, from claims arising out of the work described in this
Contract[.]”
Shmina obtained a commercial general liability insurance policy through defendant
Phoenix Insurance Company (“Phoenix”). The Phoenix policy contains an additional insured
endorsement extending general liability coverage to “any person or organization that you agree
in a ‘written contract requiring insurance’ to include as an additional insured[.]” Excluded from
this endorsement, however, is coverage for bodily injury, personal injury, or property damage
arising out of the rendering of, or failure to render, any professional architectural,
engineering or surveying services, including:
i. The preparing, approving, or failing to prepare or approve, maps, shop
drawings, opinions, reports, surveys, field orders or change orders, or the
preparing, approving, or failing to prepare or approve, drawing and
specifications; and
ii. Supervisory, inspection, architectural or engineering activities.
OHM’s overall project plan required the removal and replacement of two sludge digester
tank lids. OHM met with Shmina regarding how this work would be done. Shmina
subcontracted with nonparty Platinum Mechanical, Inc. (“Platinum”) “to provide all labor and
materials” for the “digester cover installation[.]” Platinum in turn subcontracted with nonparty
Regal Rigging & Demolition (“Regal”) to remove both digester tank lids.
Per the terms of its contract with Shmina, Platinum had to maintain a commercial general
liability insurance policy. Platinum was required to endorse its policy “to add A.Z. Shmina,
Inc.[,] [the Village of Dexter], and any additional parties as required by the Prime Contract
Document, as additional insured[.]” Platinum’s policy, obtained through defendant Federated
Mutual Insurance Company (“Federated”), includes an additional insured endorsement extending
coverage to “any person or organization, other than a joint venture, for whom you are performing
Nos. 16-1176/1231, Orchard, Hiltz & McCliment v. Phoenix Ins. Co., et al.
-4-
operations when you and such person or organization have agreed in writing in a contract or
agreement that such person or organization be added as an additional insured on your policy.”
No such contract or agreement exists between Platinum and OHM.
Like the Phoenix policy, the Federated policy contains a professional services exclusion
that limits coverage as provided for in the additional insured endorsement. Although worded
slightly differently, the Federated provision also excludes coverage for bodily injury, property
damage, or personal injury caused by
[a]ny person or organization whose profession, business or occupation is that of
an architect, surveyor or engineer with respect to liability arising out of the
preparation or approval or the failure in preparation or approval of maps, shop
drawings, opinions, reports, surveys, field orders, change orders, designs,
drawings, specifications or the performance of any other professional services by
such person or organization[.]
The digester lid removal work was underway by late April 2013. On April 22, Regal
worker David McBride was using a cutting torch to remove bolts from a digester lid. Sparks
from the torch ignited methane gas inside the digester tank and caused an explosion that injured
McBride and killed Platinum pipefitter Michael Koch. Nastally was present at the scene of the
accident taking photos of McBride as he removed bolts from the digester lid.
After the accident, McBride filed a personal injury action and Koch’s estate filed a
wrongful death action in Washtenaw County Circuit Court, each naming OHM as a defendant.
McBride alleged negligence and gross negligence on the part of OHM in the performance of its
engineering duties. Specifically, McBride maintained OHM “had a duty to exercise ordinary
skill and care common to professional engineers and/or architects” that required it “to supervise
all operations and to include in the plans, specifications and drawings, methods for safe removal
of the digester lids[.]” Similarly, Koch’s estate alleged that OHM was negligent in its duty “to
exercise the ordinary skill and care and to act as a reasonably prudent professional engineer,
Nos. 16-1176/1231, Orchard, Hiltz & McCliment v. Phoenix Ins. Co., et al.
-5-
professional architect, and inspector of [the] upgrade of the methane handling capacities of the
Dexter WWTP[.]” Both complaints alleged OHM breached its duty by failing to ensure that its
engineering plans and specifications were complied with, and that related safety precautions,
such as the use of methane detection devices, were implemented.
Plaintiff’s professional liability insurer, XL Specialty Insurance Company, defended it in
these underlying actions. OHM nevertheless filed a declaratory action in state court seeking a
judgment requiring defendants to defend and indemnify it in the McBride and Koch cases.
Phoenix removed the action to federal court, and Federated concurred in the notice of removal.
The parties filed cross-motions for summary judgment, disputing whether OHM is covered as an
additional insured under either policy and, if so, whether the policies’ professional services
exclusions bar coverage. After a hearing, the district court granted summary judgment in favor
of defendants.
The district court ruled that plaintiff was covered as an additional insured under the
Phoenix policy, but not under the Federated policy. Neither defendant had a duty to defend or
indemnify plaintiff, however, because there was no dispute of material fact that the professional
services exclusion in both policies barred coverage. Plaintiff’s subsequent motion for
reconsideration was denied, but the district court modified its original order to require Phoenix to
assume a pro rata share of any defense costs and related damages should it ultimately be
determined that Phoenix must cover OHM’s liability.
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II.
Plaintiff appeals the denial of its motions for summary judgment and reconsideration.1
“We review de novo the district court’s order granting summary judgment and its denial of
[plaintiff’s] motion for reconsideration of that order.” CMACO Auto. Sys., Inc. v. Wanxiang Am.
Corp., 589 F.3d 235, 241 (6th Cir. 2009). Summary judgment is proper only “if the movant
shows that there is no genuine dispute as to any material fact and the movant is entitled to
judgment as a matter of law.” Fed. R. Civ. P. 56(a). Although we view the evidence in a light
most favorable to the nonmovant, Rogers v. O’Donnell, 737 F.3d 1026, 1030 (6th Cir. 2013),
“[t]he plain language of Rule 56(c) mandates the entry of summary judgment . . . against a party
who fails to make a showing sufficient to establish the existence of an element essential to that
party’s case, and on which that party will bear the burden of proof at trial.” Celotex Corp. v.
Catrett, 477 U.S. 317, 322 (1986).
III.
Plaintiff argues defendants have a duty to defend and indemnify it in the underlying
actions because: (1) plaintiff is an additional insured under the Federated policy; and (2) neither
professional services exclusion applies. Michigan law governs these issues on appeal, and we
apply state law in accordance with the controlling decisions of the Michigan Supreme Court. See
Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78 (1938); see also Allstate Ins. Co. v. Thrifty Rent-ACar
Sys., Inc., 249 F.3d 450, 454 (6th Cir. 2001). Where the Michigan Supreme Court has not
yet addressed an issue, we predict how that court would rule in light of “all the available data.”
1Defendant Phoenix also cross-appeals the district court’s decision on reconsideration
requiring it to assume a pro rata share of defense costs and related damages should it be obliged
to cover OHM’s liability. However, we need not address the cross-appeal given our ruling that
plaintiff’s appeal is not meritorious. Martin Cty. Coal Corp. v. Universal Underwriters Ins. Co.,
727 F.3d 589, 598 (6th Cir. 2013). Accordingly, defendant Federated’s motion to strike
defendant Phoenix’s brief on cross-appeal is moot.
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Allstate Ins. Co., 249 F.3d at 454. “Relevant data include decisions of the state appellate courts,
and those decisions should not be disregarded unless we are presented with persuasive data that
the Michigan Supreme Court would decide otherwise.” Kingsley Assocs. v. Moll PlastiCrafters,
Inc., 65 F.3d 498, 507 (6th Cir. 1995).
1.
Plaintiff’s appeal implicates two insurance policies. Under Michigan law, “[a]n
insurance policy is much the same as any other contract. It is an agreement between the parties
in which a court will determine what the agreement was and effectuate the intent of the parties.”
Auto-Owners Ins. Co. v. Churchman, 489 N.W.2d 431, 433 (Mich. 1992). “[T]he construction
and interpretation of an insurance contract is a question of law for a court to determine[.]”
Henderson v. State Farm Fire & Cas. Co., 596 N.W.2d 190, 193 (Mich. 1999). Courts are
bound by the clear, specific language in such an agreement. Id.
Plaintiff maintains that defendants’ policies obligate them to defend and indemnify OHM
in the underlying actions. The duty to defend is broader than the duty to indemnify. Am.
Bumper and Mfg. Co. v. Hartford Fire Ins. Co., 550 N.W.2d 475, 481 (Mich. 1996). The duty to
indemnify typically does not arise until “liability for the injury has been established.” Gelman
Sci., Inc. v. Fireman’s Fund Ins. Cos., 455 N.W.2d 328, 330 (Mich. Ct. App. 1990).
“In determining whether there is a duty to defend, courts are guided by established principles of
contract construction.” Citizens Ins. Co. v. Secura Ins., 755 N.W.2d 563, 566 (Mich. Ct. App.
2008). As Michigan courts have long held:
The duty of the insurer to defend the insured depends upon the allegations in the
complaint of the third party in his or her action against the insured. This duty is
not limited to meritorious suits and may even extend to actions which are
groundless, false, or fraudulent, so long as the allegations against the insured even
arguably come within the policy coverage. An insurer has a duty to defend,
despite theories of liability asserted against any insured which are not covered
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under the policy, if there are any theories of recovery that fall within the policy.
The duty to defend cannot be limited by the precise language of the pleadings.
The insurer has the duty to look behind the third party’s allegations to analyze
whether coverage is possible. In a case of doubt as to whether or not the
complaint against the insured alleges a liability of the insurer under the policy, the
doubt must be resolved in the insured’s favor.
Id. at 566–67 (emphasis in original) (quoting Detroit Edison Co. v. Mich. Mut. Ins. Co.,
301 N.W.2d 832, 835 (Mich. Ct. App. 1981)).
With this guidance in mind, we ask whether the relevant policy language, Michigan law,
and the underlying allegations against plaintiff, taken together, require either defendant to defend
and indemnify OHM in the underlying actions. We conclude that they do not.
2.
Where an insurer’s duty to an insured is questioned, courts typically determine whether
coverage exists and then “ascertain whether that coverage is negated by an exclusion.”
Buczkowski v. Allstate Ins. Co., 526 N.W.2d 589, 594 (Mich. 1994). While plaintiff and
Federated dispute whether plaintiff is an additional insured under the Federated policy, there is
no dispute that plaintiff is an additional insured under the Phoenix policy. Because we find no
genuine dispute regarding whether either professional services exclusion applies, we assume
without deciding that OHM falls within Federated’s additional insured endorsement and turn to
this determinative issue.
3.
Plaintiff argues that neither professional services exclusion bars coverage because some
of the underlying allegations implicate “general project operations and work place safety”
concerns for which OHM was not responsible pursuant to its contracts with Dexter.
Accordingly, defendants are obligated to defend OHM unless and until the state court
conclusively determines that OHM is liable for its independent acts as project engineer. Plaintiff
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conflates the question of scope of coverage with that of ultimate liability. See Walgreen Co. v.
RDC Enters., L.L.C., No. 293608, 2011 WL 3689152, at *7 (Mich. Ct. App. Aug. 23, 2011)
(“[I]t is unnecessary to determine if there is evidence that Walgreen lacks fault for the ultimate
design of the catwalk. The material issue is whether the activities engaged in by Walgreen, and
which form the basis for the claim against it in the [underlying] negligence case, fall within the
[professional services] policy exclusion.”).
Generally, the “insured bears the burden of proving coverage, while the insurer must
prove that an exclusion to coverage is applicable.” Heniser, 534 N.W.2d at 505 n.6. Although
exclusions “are strictly construed in favor of the insured,” courts give effect to clear and specific
clauses because an insurance company cannot be held liable for risks it did not agree to assume.
Auto-Owners Ins. Co., 489 N.W.2d at 434.
Plaintiff does not distinguish between the Phoenix and Federated exclusions. Indeed, the
clauses are similarly worded. Both broadly exclude coverage for liability “arising out of”
performing or failing to perform any professional architectural, engineering, or surveying
service. Both define such services to include preparing, approving, or failing to prepare or
approve maps, shop drawings, opinions, reports, surveys, field orders, change orders, drawings,
and specifications. In addition, the Phoenix policy excludes liability coverage for all
“[s]upervisory, inspection, architectural or engineering activities,” while the Federated policy
also excludes liability coverage for “the performance of any other professional services by” any
“architect, surveyor, or engineer[.]”
We ask whether any of the underlying allegations against OHM could fall outside these
exclusions by implicating non-professional acts or omissions. Under Michigan law, “[w]hether a
professional service is being rendered depends on the nature of the act or omission, not the
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character or title of the person who acted or failed to act.” Shuler v. Mich. Physicians Mut. Liab.
Co., 679 N.W.2d 106, 126 (Mich. Ct. App. 2004). Michigan appellate courts have defined
“professional services” as those involving specialized skill of a predominantly intellectual
nature.2 See, e.g., Westfield Ins. Co. v. D & G Dollar Zone, No. 306408, 2013 WL 951086, at *4
(Mich. Ct. App. Feb. 28, 2013); see also St. Paul Fire & Marine Ins. Co. v. Quintana,
419 N.W.2d 60, 62 (Mich. Ct. App. 1988). Consequently, not all acts performed by
professionals constitute professional services. See, e.g., D & G Dollar Zone, 2013 WL 951086,
at *4 (“[W]e conclude that the term ‘professional service,’ as used in instant exclusions, does not
contemplate the mere sale of goods at a dollar store.”); Quintana, 419 N.W.2d at 62 (sexual
assault and battery does not “fall[] within the purview of being a ‘professional service’”).
Michigan courts, however, have generally interpreted professional services exclusions
broadly. See, e.g., Am. Fellowship Mut. Ins. Co. v. Ins. Co. of N. Am., 282 N.W.2d 425, 428
(Mich. Ct. App. 1979) (the “professional services” exclusion of a life insurance contract referred
to any business activity conducted by the insured company). They have even applied them to
acts not involving a specialized skill if such acts reasonably related to the overall provision of
professional services. For example, a doctor was denied liability coverage for claims alleging
2Courts often rely on the Supreme Court of Nebraska’s definition of “professional
services” articulated in Marx v. Hartford Accident & Indem. Co., 157 N.W.2d 870, 871–72
(Neb. 1968), as those “arising out of a vocation, calling, occupation, or employment involving
specialized knowledge, labor or skill, and the labor or skill is predominately mental or
intellectual, rather than physical or manual.” E.g., Dibeneditto v. Med. Protective Co., 3 F.
App’x 483, 486–87 (6th Cir. 2001); Great Am. Ins. Co. v. Geostar Corp., Nos. 09–12488–BC,
09–12608–BC, 09–14306–BC, 2010 WL 845953, at *10 (E.D. Mich. 2010); Cincinnati Ins. Co.
v. Harding, No. 2:06–CV–205, 2007 WL 3124654, at *7 (W.D. Mich. 2007); Westfield Ins. Co.
v. D & G Dollar Zone, No. 306408, 2013 WL 951086, at *4 (Mich. Ct. App. Feb. 28, 2013); St.
Paul Fire & Marine Ins. Co. v. Quintana, 419 N.W.2d 60, 62 (Mich. Ct. App. 1988). This
definition of “professional services” is consistent with that given in Michigan’s Business
Corporation Act. See M.C.L. § 450.1282(b) (“a type of personal service to the public that
requires that the provider obtain a license or other legal authorization as a condition precedent to
providing that service”).
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that he failed to “properly retrieve, transport, maintain and deliver the pathology report [to a
patient] as part of the nonprofessional duties of the business” and his staff “failed to properly
retrieve telephone and facsimile messages, place messages in the appropriate locations and
collect, sort, file and forward the mail containing the report to the proper recipient.” White v.
Auto-Owners Ins. Co., Nos. 265380, 265389, 2006 WL 664206, at *3 (Mich. Ct. App. Mar. 16,
2006). In denying relief, the Michigan Court of Appeals emphasized the substance of the claims,
reasoning that “[a]ccording to the underlying complaint, Dr. White had a professional duty as
Ogburn’s physician to obtain, review and report the biopsy findings. Because some portions of
that duty included clerical tasks does not change the overall nature of the duty.” Id.
Similarly, an engineering firm hired to conduct a soil investigation had to seek liability
coverage from its professional liability insurer rather than its general liability insurer where two
of its employees damaged telephone lines while drilling for soil samples without first calling
“Miss Dig,” Michigan’s utility notification system. Centennial Ins. Co. v. Neyer, Tiseo & Hindo,
Ltd., 523 N.W.2d 808, 810 (Mich. Ct. App. 1994). The firm argued that its failure to call “Miss
Dig” did not encompass a professional service, but the Michigan Court of Appeals held that,
because the decision to drill before calling “Miss Dig” was “preliminary to, and part of, the
‘professional service’ of conducting a soil investigation,” liability coverage was precluded under
the firm’s general liability policy. Id.
The Michigan Court of Appeals decision in Hilderbrandt ex rel. Estate of Hilderbrandt v.
Rumsey & Sons Constr., No. 220340, 2001 WL 624966 (Mich. Ct. App. June 5, 2001), is
particularly instructive. In that case, a general contractor’s employee was killed on a water main
replacement project when a trench collapsed on him. Id. at *1. An engineering firm designed
the project, served as consulting engineer, and monitored the general contractor’s progress. Id.
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The employee’s estate filed a wrongful death action against the firm, alleging that it was
negligent in failing to advise the general contractor of workplace safety violations and to provide
adequate safety supervision. See id. at *3 and *3 n.3. The firm had a commercial general
liability policy with the defendant insurer, but the insurer concluded the underlying wrongful
death allegations against the firm fell within the policy’s professional services exclusion. Id. at
*1. That exclusion was worded similarly to those at issue here. See id. at *3.
The firm countered that it “had no obligations regarding safety on the project.” Id. But
that was not the point. Instead, the court said: “the issue is whether the failure to advise [the
general contractor] and its employees of safety violations was a failure to render a professional
service.” Id. at *7. Acknowledging that “Michigan cases reveal a broad view of the term
‘professional services,’” the court held that, “[a]ssuming [the firm] had a duty to recognize and
advise regarding such a [safety] violation, the failure to do so involves a failure to render the
professional inspection and supervision services” because “the recognition of such a violation
involves some specialized knowledge and expertise in the area of trenching for water main
replacement, which was allegedly to have been provided by [the firm] under the contract.” Id.
Accordingly, the underlying allegations fell within the professional services exclusion. Id.
That reasoning is applicable here. Dexter hired OHM to oversee all aspects of Dexter’s
treatment plant improvement project; it designed the plans for every facet of the project,
monitored their implementation, served as an on-site consultant, and supervised the work to
ensure compliance with those plans and timely progress. Both underlying complaints allege that
OHM, as the project’s consulting engineer, was negligent in its duty to supervise construction
operations, provide adequate safety supervision, and to include in its project plans ways to ensure
the safe removal of the digester lids. These acts are predominantly intellectual in nature, and
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both insurance policies exclude coverage for liability “arising out of” an engineer’s or architect’s
failure to prepare or approve drawings and specifications, other “supervisory, inspection,
architectural or engineering activities,” and indeed “any other professional services.” Assuming
the underlying plaintiffs can show that OHM owed such duties, accounting for and ensuring the
safe removal of the lids in its project plans and on site would require OHM to exercise the
specialized knowledge and expertise in wastewater facility project design and supervision that
Dexter hired it to provide.
Plaintiff contends in a cursory fashion that some of the factual allegations in the
underlying complaints implicate “improper and dangerous general construction means, methods,
techniques, sequences, procedures, operations and equipment” and “improper and inadequate
worker health and safety precautions and programs” that were Shmina’s, Platinum’s, and Regal’s
responsibility. This argument does not create a genuine dispute of material fact because, like the
engineering firm in Hilderbrandt, OHM misses the point. The nature of the underlying
allegations of liability is what governs the question of coverage, not the scope of OHM’s
responsibilities under its contract with Dexter. See Detroit Edison Co., 301 N.W.2d at 835 (“The
duty of the insurer to defend the insured depends upon the allegations in the complaint of the
third party in his or her action against the insured.”). To the extent plaintiff argues it is not solely
liable for some of the underlying claims, the question of OHM’s ultimate liability to the
underlying personal injury and wrongful death claimants is for the state court to resolve. See
Walgreen Co., 2011 WL 3689152, at *7.
Plaintiff asserts that the underlying plaintiffs would hold it liable for what it deems
unskilled construction and accident prevention tasks such as failing to hold safety meetings,
monitor methane levels, and post warning signs. Not so. The substance of the underlying claims
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is that OHM is liable for failing to properly plan for, and take preventative measures to ensure,
the safe removal of the digester tank lids it required as part of the overall treatment plant upgrade
project. The underlying plaintiffs allege that OHM had a duty as the project’s consulting
engineering firm to do so. Even if some of the underlying factual allegations implicate tasks that
do not, in and of themselves, involve a specialized skill, such acts and omissions are reasonably
related to OHM’s overall provision of professional services. See White, 2006 WL 664206, at *3
(“Because some portions of that duty included clerical tasks does not change the overall nature
of the duty.”); see also Lansing Cmty. Coll. v. Nat’l Union Fire Ins. Co. of Pittsburgh, Pa., No.
1:09–111, 2010 WL 774877, at *10 (W.D. Mich. March 1, 2010) (applying Michigan law)
(coverage precluded even though some allegations arguably implicated non-professional services
because those tasks “arose from the rendering of, or failure to render, professional services”).
Phoenix and Federated provided general liability policies that were never intended to
cover professional negligence claims. Indeed, plaintiff’s professional liability insurer defended
it in both underlying tort actions. OHM may dispute that it owed or breached the duties alleged
in the underlying actions, but there is no dispute that if the underlying plaintiffs can prove their
allegations, OHM’s liability is excluded from coverage under the Phoenix and Federated
policies.
4.
Plaintiff contends that our construction of the Phoenix and Federated professional
services exclusions renders coverage under either policy illusory. That is an uphill battle.
Applied to insurance contracts, the illusory coverage doctrine requires “an insurance policy to be
interpreted so that it is not merely a delusion to the insured.” Emp’rs Mut. Cas. Co. v. Helicon
Assocs., Inc., 880 N.W.2d 839, 843 (Mich. Ct. App. 2015) (quoting Ile v. Foremost Ins. Co., 809
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N.W.2d 617, 622 (2011), rev’d on other grounds, 823 N.W.2d 426, 426 (2012)). Michigan
courts thus “avoid interpreting insurance policies in such a way that an insured’s coverage is
never triggered and the insurer bears no risk.” Id. Because coverage could be triggered where
OHM employees are exposed to liability for bodily injury or property damage caused by their
ordinary negligence in performing some task that falls outside the provision of professional
services, our interpretation renders neither policy illusory.
OHM has not established a genuine dispute of material fact regarding whether the
underlying allegations against it fall outside the provision of professional services.
Consequently, defendants are entitled to summary judgment in their favor.
IV.
For the foregoing reasons, the motion to strike defendant Phoenix Insurance Co.’s brief
on cross-appeal is denied as moot, and the district court’s judgment is affirmed.