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1325 North Van Buren5/17/2005
s" are defined as "those services that an insured is legally qualified to perform for others in the insured's practice as ... construction manager...."
Where Westport appears to err is in its failure to appreciate that this is essentially a claim of failure to adhere to professional standards, sounding in negligence, but arising in the context of a contract. Malpractice actions "may sound in either tort or contract." McMahon v. Brown, 125 Wis. 2d 351, 353, 371 N.W.2d 414 (Ct. App. 1985). Indeed, we have previously explained that failure to exercise ordinary care in the fulfillment of a contract is a tort if there is a common-law duty to exercise ordinary care independent of the contract and the contract is merely the inducement creating the state of things that furnishes the occasion of the tort. Milwaukee Partners v. Collins Eng'rs, Inc., 169 Wis. 2d 355, 361-62, 485 N.W.2d 274 (Ct. App. 1992). Moreover, " ince members of a profession have a common-law duty to exercise 'the standard of care ordinarily exercised by the members of that profession,'" Collins Engineers concluded that the contract in that case "did not create the duty of care but, rather, merely '"furnishe the occasion"' for fulfillment of that duty[.]" Id. at 362 (citation omitted). The same reasoning applies here. The contract did not create T-3's duty to exercise the requisite standard of care--it merely furnished the occasion for the fulfillment of that duty. The claims here are not based solely on contractual liability.
In Westport's policy, "wrongful act" is not defined as a "third-party cause of action in tort." It is defined as any "negligent act, error or omission in the performance of 'professional services' for others[.]" Here, 1325 has alleged a number of "negligent acts, errors or omissions in the performance of [T-3's] 'professional services'" in its complaint. These allegations not only assert a breach of contract and a failure to exercise the requisite standard of care, but also trigger the professional liability policy's coverage for T-3's "wrongful acts." If T-3 did not expect to be held liable for any damages that may result from failing to provide adequate professional services, should such allegations be raised and proven, what, then, would be the purpose of professional liability insurance?
Finally, we conclude that neither of the exclusions raised by Westport apply here. Exclusion E provides that the policy shall not apply to any claim based upon " he cost to repair or replace faulty workmanship in any construction, erection, fabrication, installation, assembly, manufacture or remediation performed by the insured...." As there is no indication that T-3 performed any construction, and the exclusion does not refer to construction management services in any form, this exclusion does not apply. Exclusion K excludes coverage for claims based upon, arising out of, attributable to, or directly or indirectly resulting from express warranties or guarantees. It does not appear that 1325 has alleged any claim against T-3 on the basis of any warranty or guarantee, and although Westport insists that 1325 is "attempting to enforce a contract, a warranty and a guarantee[,]" it has failed to present that argument with any real specificity. In light of our discussion above, we are unconvinced that this exclusion applies. For these reasons, we reverse and remand for further proceedings.
By the Court.--Judgment and orders reversed and cause remanded with directions.
Recommended for publication in the official reports.
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