2009 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

11-18-2009

Wimberly Allison Tong & Goo, I v. Travelers

Property Casualty Co

Precedential or Non-Precedential: Non-Precedential

Docket No. 08-2976

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Recommended Citation

"Wimberly Allison Tong & Goo, I v. Travelers Property Casualty Co" (2009). 2009 Decisions. Paper 242.

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NOT PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

_____________

No. 08-2976

_____________

WIMBERLY ALLISON TONG & GOO, INC.,

 Appellant

v.

TRAVELERS PROPERTY CASUALTY 

COMPANY OF AMERICA; 

GULF UNDERWRITERS INSURANCE GROUP

 

Appeal from the United States District Court

for the District of New Jersey

(D.C. Civil No. 05-cv-2550)

District Judge: Honorable Jerome B. Simandle

 

Submitted Under Third Circuit LAR 34.1(a)

November 17, 2009

Before: RENDELL, BARRY and CHAGARES, Circuit Judges.

(Filed: November 18, 2009)

 

OPINION OF THE COURT

 

RENDELL, Circuit Judge.

Plaintiff Wimberly, Allison, Tong & Goo, Inc. (“WATG”) appeals the District

Court’s grant of summary judgment to Defendants Travelers Property Casualty Company
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of America (“Travelers”) and Gulf Underwriters Insurance Group (“Gulf”). The District

Court held that Travelers and Gulf did not have a duty to defend WATG in the underlying

actions against WATG arising out of a parking garage collapse during construction on the

Tropicana Casino Resort in Atlantic City, New Jersey (“Tropicana”).

I. The Underlying Occurrence

In November 2000, WATG, an architectural firm, entered into an Owner-Architect

agreement with Tropicana for the construction of a parking garage. On October 30, 2003,

six levels of that parking garage collapsed, causing numerous deaths and serious injuries. 

Govathlay Givens filed the first lawsuit against WATG and numerous other defendants

seeking compensatory and punitive damages arising out of injuries he sustained during

the collapse. Givens alleged that WATG failed “to perform as a reasonable architect

would under the same or similar circumstances,” “failed to properly design the parking

garage, failed to properly supervise the construction of the parking garage, failed to

provide proper specifications for the construction . . . failed to inspect and supervise the

work . . . and otherwise deviated from the standard of care expected of architects.” A.

314. Givens also alleged that WATG “knew or should have known of the dangerous

condition of the parking garage . . . but failed to take action . . .” and that Given suffered

injuries as a “result of the negligence, carelessness, recklessness, and/or willful and

wanton conduct of [WATG] . . . .” A. 314-15. 

A hotel/restaurant near the site of the garage collapse called Another Time, Inc.
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also filed a complaint against WATG. Another Time alleged negligence, private

nuisance, and public nuisance against numerous defendants, including WATG, and

sought compensatory and punitive damages. Specifically, Another Time alleged that

defendants “unreasonably interfered with the use and enjoyment of the property of the

Plaintiff,” which resulted in economic loss and diminished property value and that

defendants interfered with the right of the public to use and traverse the public streets. A.

341-42. The factual allegations against the defendants that formed the basis for Another

Time’s claims include violating construction codes, failure to design, construct, and

maintain the garage in a way that would ensure it did not collapse, failure to properly

supervise the construction, failure to design and follow proper blue prints, and failure to

notice warning signs of a danger of collapse. 

Many other plaintiffs filed similar suits that were consolidated using a Master

Complaint alleging that WATG deviated from the standard of care of professional

architects, that the engineering design of the garage did not conform to Occupational

Safety and Health Administration (“OSHA”) standards, which caused the collapse of the

garage, and that WATG was otherwise careless and negligent. The Master Complaint

brought the following claims against all defendants, including WATG: loss of

consortium, wrongful death, wrongful death - survivorship, and bystanders’ claims for

emotional distress. 
WATG alleges that the costs of defense and settlement exceeded the $1 million limit of 1

the CNA primary professional liability policy and the $2 million per occurrence/$5

million aggregate limit of the CNA excess professional liability policy. Specifically,

WATG claims that it incurred $2,323,000 in defense costs that were never reimbursed. 

Appellees contend that WATG’s required contribution to a global settlement was

$500,000, which was paid by CNA. Appellees’ Br. 15, A. 14, A. 402-03. 

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II. The Liability Policies

At the time of the garage collapse, WATG had a professional liability policy and

an excess professional liability policy with Continental Casualty Company (“CNA”), a 1

commercial liability policy with Travelers, and a commercial excess liability policy with

Gulf. The Travelers policy covered damages arising out of “‘bodily injury’ or ‘property

damage’” caused by an “‘occurrence’” in the “‘coverage territory.’” The Travelers policy

also contained the following exclusion:

This insurance does not apply to “bodily injury,” “property

damage,” “personal injury” or “advertising injury” arising out of

the rendering of or failure to render any professional services by

you or any engineer, architect or surveyor who is either

employed by you or performing work on your behalf in such

capacity. 

Professional services include:

1. The preparing, approving, or failing to prepare or

approve maps, shop drawings, opinions, reports, surveys,

field orders, change orders, or drawings and

specifications; and 

2. Supervisory, inspection, architectural or engineering

activities. 

A. 136.
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The Gulf commercial excess liability policy provided that Gulf would pay the

“‘ultimate net loss’ . . . which the insured becomes legally obligated to pay as damages

because of ‘bodily injury,’ ‘property damage,’ ‘personal injury’ or ‘advertising injury’ to

which this insurance applies.” A. 179. Gulf agreed to defend any suit for damages that

are not payable by the underlying insurance policy, either because the damages were not

covered or because the underlying insurance was exhausted by the payment of claims. 

Like the Travelers policy, the Gulf policy “does not apply to ‘bodily injury,’ ‘property

damage,’ ‘personal injury,’ or ‘advertising injury’ arising out of: 1. the rendering of; or 2.

failure to render; any professional services by or for you.” A. 166. 

III. Denial of Coverage

On April 16, 2004, WATG notified Travelers of the Givens complaint and several

other complaints. On May 12, 2004, Travelers denied coverage based on the professional

liability exclusion in the policy, stating that “due to the services you and your

subcontractors were performing on this construction project, as architects, coverage

would be excluded . . . .” A. 1048. WATG subsequently notified Travelers of additional

suits that had been filed and asked Travelers to reconsider its coverage position. On

December 17, 2004, Travelers again denied coverage but noted that if a claim against

WATG was brought that was unrelated to its professional activities, a duty to defend

would arise. Travelers further invited WATG to provide Travelers with any additional

information that may impact its decision. In March and May 2005, WATG notified
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Travelers of additional claims but Travelers’ position on the denial of coverage did not

change. 

On April 16, 2004, WATG also notified Gulf of the underlying lawsuits and

requested defense and indemnification. On February 4, 2005, Gulf responded that this

request was premature as WATG did not state that primary coverage was exhausted or

denied, but nonetheless reserved its right to deny coverage based on the professional

liability exclusion. In March 2005, WATG notified Gulf of additional suits and in May

2005 WATG notified Gulf that Travelers was not providing coverage, but Gulf never

agreed to defend or indemnify WATG. 

IV. Standard of Review

Summary judgment is appropriate if there are no genuine issues of material fact

and the moving party is entitled to summary judgment as a matter of law. Fed.R.Civ.P.

56(c). After giving the nonmoving party all reasonable inferences, there is a genuine issue

of material fact if a reasonable jury could find for the nonmoving party. Reliance Ins. Co.

v. Moessner, 121 F.3d 895, 900 (3d Cir. 1997) (citations omitted). Our review of the

district court's grant of summary judgment is plenary. Id. In addition, our review of the

interpretation of an insurance contract and the applicability of a policy exclusion is

plenary. Harad v. Aetna Cas. & Sur. Co., 839 F.2d 979, 982 (3d Cir. 1988). 
All parties agree that New Jersey law is applicable to this case. 

2

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V. Duty to Investigate

Under New Jersey law, after an insured notifies an insurer of a potential claim, the 2

insurer has a duty to promptly investigate the claim and notify the insured of the results of

the investigation within a reasonable time. Griggs v. Bertram, 443 A.2d 163, 170 (N.J.

1982). 

Although the insurer cannot ignore known information simply because it is not

included in the complaint, the insurer has no duty to investigate possible

ramifications of the underlying suit that could trigger coverage. Rather, the

insured being sued is responsible for promptly conveying to its insurance

company the information that it believes will trigger coverage. 

SL Indus., Inc. v. Am. Motorists Ins. Co., 607 A.2d 1266, 1272 (N.J. 1992). 

Even WATG concedes that the defendants need only perform “some semblance” of an

investigation and that this need not be “‘fool-proof.’” Appellant’s Br. 29 (citing

Universal-Rundle Corp. v. Commercial Union Ins. Co., 725 A.2d 76, 89 (N.J. Super. Ct.

App. Div. 1999)).

WATG claims that the defendants did not even perform a cursory investigation

into the claims prior to denying coverage and that the District Court failed to address this

issue. While the District Court did not specifically discuss this, it is clear that the

defendants fulfilled their duty to investigate the claims. Upon receipt of the letter

informing Travelers of the Givens complaint, Dawn Minell, a technical specialist at

Travelers, spoke to both WATG’s corporate counsel and “broker.” A. 1034. Minell also
8

reviewed the complete policy and, based on the facts provided as well as the counts in the

Givens complaint, decided that coverage should be declined. After Minell denied the

claim and WATG challenged this denial, the case was reassigned to Lorraine Ankosko, a

senior liability technical specialist. Ankosko immediately obtained outside counsel, John

Tinker, to ensure an independent and thorough review of coverage. Tinker sent WATG a

seven-page letter outlining Travelers’ reasons for denying coverage and listing numerous

documents that were reviewed in making that decision. Furthermore, Tinker asked

WATG to provide Travelers with any addition information if “discovery in the underlying

case generates facts supporting a claim of liability against [WATG] unrelated to its

professional activities . . . .” A. 1084. 

Likewise, Clay Woodman, on behalf of Gulf, reviewed numerous documents

provided by WATG and wrote a detailed letter to WATG explaining Gulf’s denial of

coverage. Furthermore, Gulf maintained that WATG’s request for a defense and

indemnification was premature because WATG did not indicate that their primary

coverage was either exhausted or denied. 

Based on the above facts, it is clear that Travelers and Gulf fulfilled their

obligation to investigate the underlying claims prior to making a decision on coverage.

VI. Duty to Defend

An insurer has a duty to defend if the allegations in the complaint, on its face, are

encompassed by the risks insured against by the policy. W9/PHC Real Estate LP v. Farm
9

Family Cas. Ins. Co., 970 A.2d 382, 391 (N.J. Super. Ct. App. Div. 2009) (citations

omitted). Coverage is determined by the “nature of the claim” against the insured, not by

how the underlying plaintiff chooses to phrase the complaint. SL Indus., Inc., 607 A.2d at

1272. The duty to defend may arise even if the underlying complaint is meritless because

an insurer’s duty to defend is broader than its duty to indemnify. W9/PHC Real Estate

LP, 970 A.2d at 391 (citing Voorhees v. Preferred Mut. Ins. Co., 607 A.2d 1255, 1259

(N.J. 1992). Insurance policies should be given their plain and ordinary meaning, but

should be interpreted “liberally in favor of the insured and strictly against the insurer.” 

Id. (citations omitted). If a complaint is ambiguous it should be interpreted in favor of the

insured. Voorhees, 607 A.2d at 1259 (citations omitted). When the underlying complaint

contains multiple causes of action, the insurer has a duty to defend until “every covered

claim is eliminated.” Id. 

Professional liability policies and general liability policies are intended to cover

different types of risk. Search EDP, Inc. v. Am. Home Assurance Co., 632 A.2d 286, 288

(N.J. Super. Ct. App. Div. 1993). Professional liability policies are intended to cover

risks inherent to a particular profession, such as the failure to perform with a standard of

skill expected, as opposed to risks that arise as with many types of businesses. Id. For

example, the ‘professional’ aspects of a law practice include giving legal advice, filing

suits, etc., whereas the commercial aspects include setting up a business, dealing with

staff, paying bills, etc. Harad, 839 F.2d at 985. “A professional act or service is one
10

arising out of a vocation, calling, occupation, or employment involving specialized

knowledge, labor, or skill, and the labor or skill involved is predominantly mental or

intellectual . . . .” Id. at 984 (quotation omitted). The categorization of a party’s liability

is determined based on the activity that party was involved in at the time the liability

arose. Id. at 985. “For example, if an attorney, while hosting a real estate closing in his

office, places his briefcase on the floor and a colleague trips on it, is injured and sues him,

the lawyer’s liability would derive not from the rendering of a professional service, but

rather from his operation of a business.” Id.

In analyzing whether a professional services exclusion in a general liability policy

applies, courts must examine the “character of the [insured’s] conduct” alleged and the

“nature of the services” performed by the insured to determine if the insured’s liability

“flowed directly” from a professional activity. Harad, 839 F.2d at 984-85. Some factors

that affect this consideration are whether or not the underlying acts of the insured required

the specialized skill and knowledge of someone in the insured’s profession, whether the

acts were within the normal practice of that profession, and whether the acts were done

pursuant to a contract which provided the insured with financial compensation. Atl. Mut.

Ins. Co. v. Cont’l Nat’l Am. Ins. Co., 302 A.2d 177, 181 (N.J. Super. Ct. Law Div. 1973). 

WATG concedes that the professional malpractice exclusions in the policy are

valid and applicable to the underlying professional malpractice claims. Appellant’s Br.

41. WATG contends, however, that Travelers and Gulf had a duty to defend the
11

underlying actions because those complaints contained both excluded professional

malpractice claims and covered claims, such as personal injury, wrongful death, public

and private nuisance, bystander emotional distress, and loss of consortium. WATG

highlights the fact that both the Givens complaint and the Another Time complaint allege

“general negligence.” Appellant’s Br. 36. In further support of requiring coverage,

WATG points out that the Case Information Statements (“CIS”) filed with the underlying

complaints did not categorize the complaints as “professional malpractice” and no

Affidavits of Merit were filed with the complaints, which are required under New Jersey

law if a party alleges professional malpractice. 

The bottom line here is that all of the allegations against WATG in the Givens

complaint, the Another Time complaint, and the Master Complaint arose out of WATG’s

professional services as an architect. WATG’s only involvement with the garage

collapse, which is the basis of the underlying suits, is that they had an Owner-Architect

agreement with Tropicana and were performing as an architectural firm in accordance

with that contract. Plaintiffs have not pointed to any allegations of WATG’s conduct that

were unrelated to WATG’s professional architectural services. Under the guidance of

Harad, it is clear that the “character” of WATG’s “conduct” at issue was professional in

“nature” and that therefore WATG’s potential liability “flowed directly” from a

professional activity, namely architecture. 839 F.2d at 984-85. As the District Court

points out, the fact that the plaintiffs did not file Affidavits of Merit or categorize the
 Therefore, we need not address Gulf’s contention that even if the exclusion did not 3

apply, WATG is not entitled to coverage from Gulf because CNA had an undisputed duty

to defend all of the underlying claims. 

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claims as professional malpractice on the CIS forms is not dispositive because all of the

complaints included numerous defendants, some of whom were acting in a professional

capacity and some of whom were not. The District Court was correct in concluding that

all of WATG’s actions or failures alleged in the underlying complaints flowed directly

from WATG’s professional role as an architect, and that, therefore, the professional

services exclusion in both the Travelers and Gulf policies would apply.3

VII. Genuine Issues of Material Fact

On January 29, 2008, both WATG and Defendants filed cross-motions for

summary judgment, indicating that all parties believed the matter was ripe for such a

decision. The only alleged genuine issues of material fact are discussed above: 1)

evidence indicated that there were potentially covered claims of negligence, nuisance, and

loss-of consortium alleged in the underlying complaints; 2) no Affidavits of Merit were

filed; 3) CIS forms indicated that the underlying claims were not for professional

malpractice; and 4) the Another Time complaint alleges loss of business, which is not a

damage arising from bodily injury or property damage and therefore does not fall under

the policy exclusion. All of these allegations arise from WATG’s role providing

professional architectural services and WATG demonstrates no genuine issue of material
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fact as to the circumstances leading to any of the underlying allegations. 

For the reasons set forth above, we will AFFIRM the Order of the District Court.