The Wrong Side of the Delineator: Insurer on the Hook for Defense of Interstate Contractor
The Florida Department of Transportation, or FDOT, hired DBi Services, LLC, to maintain the lane delineators along Interstate 95 in Miami-Dade County. Part of its duties was to replace damaged or missing delineators.
DBi used delineator vendor Flexstake, Inc. to purchase its product. Each delineator had a retroreflective sheeting material post that was manufactured by Orafol Americas, Inc.
FDOT, however, was not pleased with the Flexstake product; it found that DBi was frequently replacing the delineators shortly after installation due to broken markers. FDOT sought a more appropriate fit and removed Flexstake from its approved product list.
However, the FDOT did not mention any specific manufacturer of delineators to take Flexstake’s place.
Flexstake investigated. According to the vendor, DBi had installed “counterfeit” delineators. Orafol agreed. Together, they alleged DBi had been using generic bases and hinges from an outside party and attaching them to the existing Flexstake product.
Both filed separate lawsuits against DBi.
DBi contacted its insurer, Steadfast Insurance Company, with which it held a contractor’s protective professional indemnity and liability insurance policy.
Steadfast denied both submissions.
DBi countered, sending a letter explaining why Steadfast’s policy had been triggered by the underlying actions. Steadfast, however, filed for declaratory judgment. It believed it had no obligation under the policy to defend or indemnify.
The decision was left for the courts.
In the policy, argued Steadfast, it only had “the right and duty to defend … any ‘Professional Liability Claim’ seeking ‘Damages’ to which Coverage Part A of this insurance applies.”
According to the definitions outlined in the policy, a “professional liability claim” would include any demands received by DBi that sought damages for “professional services” DBi was responsible or liable for.
Steadfast and DBi were torn on the definition of “professional services.”
DBi argued that under its FDOT contract, it was working as an inspector and construction manager. Every time DBi worked with or replaced a Flexstake/Orafol delineator, it was doing so as a manager.
But Steadfast held these actions were not the duties of either an inspector or construction manager; maintaining and installing the delineators, it argued, was periodic maintenance, and therefore not covered.
But the court said no dice.
Scorecard: The court agreed with DBi Services, stating Steadfast Insurance Company has a duty to defend for the underlying actions.
Takeaway: When seeking out insurance coverage for a contracting job, best practice is to review the services being offered to clients with the insurer. That way, insureds will know what duties are covered. &