Duty To Defend Insured Where A Third Party Sustains An Injury

Law Talk

Sam K. Abdulaziz
Attorney at Law

Food Pro International, Inc. ("Food Pro") is a consulting firm that prepares and implements plans for food processing and distribution operations. Although this may seem out of the realm of our expertise, the theory is significant. Food Pro provides a range of consulting engineering services, from studies to construction and equipment installation management. Mariani Packing Co. ("Mariani"), a fruit processor, hired Food Pro to assist it in the relocation of its operations. Mariani also hired an electrical contractor to disconnect certain equipment. An employee of the electrical contractor fell through the extruder opening in a mezzanine while tracing electrical lines on a ceiling. At the time of the accident, Food Pro was covered by a $1 million commercial general liability insurance policy issued by Farmers Insurance Exchange ("Farmers"). Farmers denied coverage in relation to the tort (intentional act or accident) action against Food Pro. Food Pro then sued Farmers in an action alleging that there was no duty to defend.

The Appellate Court held that an insurer has a duty to defend an insured if the third party pleads facts giving rise to the potential for coverage under the insurance agreement. In order to prevail in a duty to defend action, "the insured must prove the existence of a potential for coverage, while the insurer must establish the absence of any such potential."

Farmers claimed Food Pro's conduct fell within the "professional services" exclusion, rendering no duty to defend. However, professional services involve "specialized knowledge, labor, or skill." Food Pro did not design or direct removal of the extruder, nor did it supervise the employee's actions, as part of its professional services. Food Pro was merely on site at the time the employee sustained his injuries. The court therefore rendered a finding against Food Pro and Farmers had a duty to defend Food Pro.