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United States Fidelity and Guaranty Co. v. VOA Associates

August 27, 2009


The opinion of the court was delivered by: Matthew F. Kennelly United States District Judge



United States Fidelity and Guaranty Company (USF&G) has sued VOA Associates, Inc. (VOA) and Liberty International Underwriters (Liberty) for a declaration that it no longer has a duty to defend VOA in a state court lawsuit and partial reimbursement of costs it has already expended in defense of VOA. USF&G, VOA, and Liberty have moved this Court for summary judgment. For the following reasons, the Court denies the motions.


USF&G issued a general commercial liability insurance policy to VOA, with a liability limit of $1,000,000 per accident and $2,00,000 in the aggregate. The USF&G policy contains a professional services exclusion endorsement in the primary coverage. The exclusion provides that coverage under the policy does not apply to bodily injury "due to rendering or failure to render any professional service by or on behalf of any insured." USF&G Mot., Ex. 2. Professional service, as defined in the policy, includes architectural and design work. The USF&G policy also included umbrella coverage of up to $5,000,000, which likewise contains a professional services exclusion. In addition, the policy provides that the insured "must see to it that [USF&G is] notified as soon as practicable of an 'occurrence' or an offense which may result in a claim." Id., Ex. 1 at 17.

Liberty issued a series of one-year professional liability policies to VOA between 2003 and 2007. They were "claims made and reported" policies, requiring as a prerequisite to coverage that VOA report a claim to Liberty within the same policy year as the claim was made to VOA. The Liberty policies also allow VOA to report circumstances which it believes may give rise to a claim. If a claim arising from those circumstances is subsequently made, it will be deemed to have been reported within the year the circumstances were reported to Liberty. Each of the policies provides that any such notification of circumstances must be made in writing and include the reasons for anticipating the claim, the nature of the damages, the names of the potential claimants, and the manner in which the insured became aware of the circumstances.

In 1998, VOA entered into a contract with Consolidated High School District No. 230 to perform architectural and design services for several schools, including Alonzo Stagg High School. The contract stated that VOA would not be responsible for "construction means, methods, techniques, sequences or procedures, or for safety precautions and programs in connection with the Work, since these are solely the Contractor's responsibility." USF&G Mot., Ex. 4 at 5.

On August 19, 2002, Michael Madden, an employee of the school district, allegedly fell into an orchestra pit designed by VOA at Alonzo Stagg High School. Al Mignon, a VOA employee, was informed of the accident sometime afterwards but did not report it to anyone else at VOA. In January 2003, Madden filed suit in the Circuit Court of Cook County but did not name VOA as a defendant. On August 19, 2004, Madden filed his third amended complaint, in which he named VOA as a defendant. Madden alleged that VOA was the architect that designed the orchestra pit but asserted negligence claims relating to construction, not design.

Immediately after it was served with the third amended complaint, VOA submitted the complaint to its insurance broker and then to USF&G. In December 2004, USF&G hired attorney Kurt Beranek to defend VOA in the Madden action.

In May 2005, Beranek received via fax a reservation of rights letter from USF&G, addressed to VOA. Iris Robinson, a USF&G employee, testified during her deposition that she addressed the letter to VOA and placed it in the outgoing mail bin. She testified during a prior deposition that she did not recall sending the letter. VOA had no record of receiving the letter, and USF&G had no copy of the May 2005 letter.

Although it misquoted VOA's policy and liability limitations, the May 2005 letter stated that USF&G was reserving its rights to deny coverage based on the professional services exclusion. The letter also disclosed that Beranek had represented USF&G on other matters.

USF&G's claim log indicates that there was some confusion regarding the sending of a reservation of rights letter. An entry on December 7, 2004, captioned "Management Review" states "send me a copy of the ROR letter you sent to [VOA]." Id. Ex. 30 at 34. Other entries include

* January 4, 2005-"where is . . . ror letter that was suppose [sic] to be ...

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