Town’s Insurance Company Not Required to Defend Town

Oemig vs. Town of Lowell (not recommended for publication)

The Town of Lowell, in Dodge County undertook a road construction project. As is very typical, they apparently hired an engineering company, and a construction company, and the project was designed and constructed. The Oemigs, neighboring property owners, sued the Town, the engineering company, the construction company, and the construction company’s insurance company for various claims of damage to their property allegedly caused by the road project. (The first lesson here is that when someone wants to sue someone, it is often a scatter gun approach – sue everyone you can think of and see if anything sticks).

The Town had a “business owners” insurance policy with Rural Mutual Insurance. However, this insurance policy contained a “professional services” exclusion. Essentially, the gist of the court case was that if the Town “constructed” the roads, then the insurance company would defend them, but since the Oemigs’ allegations against the Town were based on the fact that the Town “negligently approved the design of the project,” the insurance company had no duty to defend the Town. Negligently construct the road = duty to defend. Negligently approve the design of the road = no duty to defend.

The circuit court found that the Oemigs’ claim against the Town was based on the “negligent design” not negligent construction. The appeals court affirmed. To be sure, the Oemigs were also making claims based on the actual construction of the project, but not, apparently, against the Town, only against the construction company and maybe the engineering company. Thus the narrow holding in this appeals case was that Rural Mutual Insurance does not have to defend the Town against allegations of negligent design of the project. It appears the litigation will continue, with the Town paying the bill for its defense.