Hurst-Rosche Engineers, Inc. v. Commercial Union Ins. Co.
| Decision Date | 05 April 1995 |
| Docket Number | No. 94-1605,HURST-ROSCHE,94-1605 |
| Citation | 51 F.3d 1336 |
| Parties | ENGINEERS, INCORPORATED, Plaintiff-Appellant, v. COMMERCIAL UNION INSURANCE COMPANY, also known as American Employers Insurance Company and Cincinnati Insurance Company, Defendants-Appellees. |
| Court | U.S. Court of Appeals — Seventh Circuit |
Richard J. Pautler, Catherine H. Johnson (argued), Catherine H. Johnson, Peper, Martin, Jensen, Maichel & Hetlage, St. Louis, MO, for Hurst-Rosche Engineers, Inc.
Al J. Pranaitis, C. Raymond Bell (argued), Hoagland, Fitzgerald, Smith & Pranaitis, Alton, IL, for Commercial Union Ins. Co.
Paul W. Johnson (argued), Burroughs, Hepler, Broom, Macdonald & Hebrank, Edwardsville, IL, for Cincinnati Ins. Co.
Before CUMMINGS, FERGUSON * and COFFEY, Circuit Judges.
Hurst-Rosche Engineers, Inc. ("Hurst-Rosche"), appeals the district court's orders granting summary judgment in favor of its two insurers, Commercial Union Insurance Company, also known as American Employers Insurance Company ("American") and Cincinnati Insurance Company ("Cincinnati"). The district court held that the professional liability exclusion clauses contained in each of two commercial liability policies issued to Hurst-Rosche by American and Cincinnati relieved the insurers of any duty to defend or indemnify Hurst-Rosche against libel and tortious interference with contract claims arising from an alleged defamatory letter written by K. Dean McIlravy, Hurst-Rosche's general manager. The court also held that the Cincinnati policy's definition of a covered "occurrence" precluded coverage for intentional tort claims, including tortious interference with contract. We affirm the trial court's order granting summary judgment in favor of American and also affirm the district court's order granting summary judgment in favor of Cincinnati, but on grounds different from those relied upon in the trial court's decision.
Hurst-Rosche, an engineering firm based in Hillsboro, Illinois, was hired to design and supervise the construction of a twenty-two building apartment complex for the Housing Authority of St. Clair County, Illinois. The Housing Authority retained Quality Granite Construction Co. ("Quality Granite") of Madison County, Illinois, as the general contractor for the project. Hurst-Rosche's contract with the Housing Authority required that weekly inspection reports be filed with the Housing Authority specifying "whether or not the work is compliant with job plans and specifications." Hurst-Rosche was required to report "any deficiencies observed" and advise the Housing Authority as to "the approximate completion status" of the project as of the date of each inspection.
On September 12, 1989, Hurst-Rosche's general manager, K. Dean McIlravy, sent a letter typed on company stationery to Transamerica Premier Insurance Company, the issuer of the performance bond which guaranteed Quality Granite's work. The letter read:
Transamerica Premier Insurance Company
333 Anita Drive
Orange, California 92668
Attention: Mr. David Marcoulides
Re: 1984 CIAP Project IL 30-907
Exterior Improvements
Brickwork, Siding and Canopies
St. Clair County Housing Authority
Village of Brooklyn, Illinois
Dear Sir:
In view of our recent meetings with the St. Clair County Housing Authority (HUD), and Mr. Vincent Marsala [the president] of "Quality" Granite Construction Company, we feel it is our responsibility to advise you that "Quality" Granite may be considered in default.
Our reasoning being the contractor's failure to complete the project in a timely manner, substandard workmanship, reluctance to complete punch list items and inability to correctly interpret the contract documents, plans and specifications as bid.
Due to these circumstances, it would be our recommendation that a meeting be scheduled as soon as possible with all parties involved in order to resolve the differences and close out the project.
Please advise this office to schedule a meeting. Should you have any questions, feel free to contact me at 618/398-0930.
Very truly yours,
HURST-ROSCHE ENGINEERS, INC.
K. Dean McIlravy
KDM/ss
cc: Mr. David L. Wagner--S.C.C.H.A.
Mr. Vincent Marsala--Quality Granite
Construction Co.
(Emphasis in original.)
After reading this letter, Quality Granite's president, Vincent Marsala, filed suit against Hurst-Rosche and K. Dean McIlravy in Madison County, Illinois for libel and tortious interference with contract (the "Quality Granite lawsuit"). 1 In its complaint, filed January 18, 1990, Quality Granite alleged as follows:
[Count I--Defamation]
* * * * * *
3. At all times herein mentioned, K. Dean McIlravey [sic] was, and still is, an agent and/or servant of Hurst-Rosche, acting in furtherance of the business interests of Hurst-Rosche.
4. By letter dated September 12, 1989, a copy of which is attached hereto as Exhibit A and incorporated herein by reference, Hurst-Rosche, acting through McIlravey [sic], published certain statements relating to [Quality Granite's] business and occupation.
5. Such statements were published to various third parties, including, without limitation, Transamerica Premier Insurance Company and the St. Clair County Housing Authority.
6. Such letter contains false and defamatory statements of fact imputing lack of ability on the part of [Quality Granite] in its trade or business, including a statement accusing [Quality Granite] of "failure to complete the project in a timely manner, sub-standard workmanship, reluctance to complete punch list items and inability to correctly interpret the contract documents, plans and specifications as bid."
7. As a proximate result of the foregoing false and defamatory statements, [Quality Granite] has lost profits and its reputation has been seriously damaged.
* * * * * *
[Count V--Tortious Interference with Contract]
* * * * * *
7. At the time the aforesaid statements were published to St. Clair County Housing Authority ("SCCHA"), a contract existed between [Quality Granite] and SCCHA, pursuant to which contract [Quality Granite] was owed in excess of $30,000.00.
8. At the time the aforesaid statements were published to Transamerica Premier Insurance Company ("Transamerica"), an on-going business relationship existed between [Quality Granite] and Transamerica, pursuant to which Transamerica underwrote bonds for construction projects for [Quality Granite].
9. At the time the aforesaid statements were published to Transamerica and SCCHA, McIlravey [sic] knew of the existence of the foregoing contractual and business relationships between [Quality Granite] and Transamerica and [Quality Granite] and SCCHA.
10. By virtue of such false and defamatory statements, Hurst-Rosche tortiously interfered with the existing contractual and business relationships between [Quality Granite] and SCCHA and [Quality Granite] and Transamerica, in that, as a result of such statements, (a) SCCHA has withheld the sums due [Quality Granite] pursuant to its contract and (b) Transamerica has refused to underwrite bonds on subsequent projects.
* * * * * *
12. The aforesaid tortious interference with [Quality Granite's] contractual and business relations were committed by McIlravy knowingly and with intent to injure [Quality Granite].
In January 1990, Hurst-Rosche was the policyholder on two commercial liability insurance policies issued by American and Cincinnati. Both the American policy, a general commercial liability policy, and the Cincinnati policy, an umbrella commercial liability policy, expressly covered defamation claims. The American policy provided coverage for personal injuries, defined by the policy to include injuries "arising out of [the] ... [o]ral or written publication of material that slanders or libels a person or organization or disparages a person's or organization's goods, products or services; ...." The Cincinnati policy also provided coverage for personal injuries, defined by the policy to include "libel, slander, [and] defamation of character,...." In February 1990, Hurst-Rosche tendered the defense of the Quality Granite lawsuit to both American and Cincinnati. The insurers, American and Cincinnati, reviewed the language of their respective policies and compared Quality Granite's claims to the policies' terms of coverage and exclusions.
American denied coverage and refused to defend Hurst-Rosche in the Quality Granite lawsuit because of the professional liability exclusion clause contained in the American policy, which stated:
This insurance does not apply to "bodily injury", "property damage", "personal injury" or "advertising injury" arising out of the rendering or failure to render any professional services by or for you, including:
1. The preparing, approving, or failing to prepare or approve maps, drawings, opinions, reports, surveys, change orders, designs or specifications; and
2. Supervisory, inspection or engineering services.
By letter dated March 12, 1990, American notified Hurst-Rosche that the Quality Granite complaint "alleges defamation of the plaintiffs, publication of defamatory statements concerning the plaintiffs, [and the] plaintiffs are requesting punitive damages...." American quoted the language of the professional liability exclusion clause as the reason for its denial of coverage and urged Hurst-Rosche to retain its own attorney to defend the Quality Granite lawsuit.
Cincinnati also denied coverage and refused to defend Hurst-Rosche in the Quality Granite lawsuit. Cincinnati based its denial of coverage on two policy provisions, one which restricted coverage to "occurrences," defined as "an accident, or a happening or event ... which unexpectedly or unintentionally results in personal injury, ..." (emphasis added) (as noted above, the policy defined personal injury to include libel) and one which excluded from coverage personal injuries or damages
aris[ing] out of any claim for Professional...
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