Liberty Mutual Insurance Company, Australia Branch v SunWater Ltd (No 2)

1. [1]

   The Queensland Bulk Water Supply Authority (trading as Seqwater) owns and operates two dams in the Brisbane River Basin known as the Wivenhoe and Somerset Dams.

2. [2]

   By a Service Level Agreement made on 18 May 2011 between Seqwater and the First Defendant, SunWater Ltd, SunWater agreed to provide Seqwater with “flood management services” for the dams in accordance with a “Manual of Operational Procedures for Flood Mitigation at Wivenhoe Dam and Somerset Dam” (the “Manual”).

3. [3]

   In January 2011, parts of the Greater Brisbane and Ipswich areas, located downstream from the Wivenhoe Dam, [1] were inundated by floodwaters causing widespread property damage.

4. [4]

   In 2017, Rodriguez & Sons Pty Ltd commenced class action proceedings on behalf of group members who had suffered damage in the flood against Seqwater, SunWater and the State of Queensland.

5. [5]

   In those proceedings, Rodriguez alleged that, in the days leading up to the 2011 flood event, insufficient releases of water for flood mitigation purposes were made from Wivenhoe and Somerset Dams, which meant that when extreme rainfall occurred on 9, 10 and 11 January 2011, the dam operators were forced to release large volumes of water, exacerbating the impact of the flood on downstream urban areas and group members’ properties.

6. [6]

   Rodriguez brought a claim against SunWater for negligence, including on the basis that SunWater was liable for breaches of duty committed by its employee, Mr Robert Ayre, who was acting as the Senior Flood Operations Engineer at the time, in failing to conduct flood mitigation operations in accordance with the Manual and in such a manner as to prevent the inundation of the areas in which Rodriguez’s and the group members’ properties were located. SunWater was said to be liable either for its own acts or omissions, based on its obligation to provide the flood management services under the Service Level Agreement with Seqwater, or alternatively, vicariously liable for the conduct of Mr Ayre as its employee.

7. [7]

   The class action proceedings were heard by Beech-Jones J between December 2017 and March 2019. On 29 November 2019, Beech-Jones J delivered judgment in Rodriguez & Sons Pty Ltd v Queensland Bulk Water Supply Authority t/as Seqwater (No 22). [2]

8. [8]

   Relevantly, his Honour held that each of the flood engineers, including Mr Ayre, owed a duty of care to Rodriguez and the group members in conducting flood mitigation operations before and during the 2011 flood event, that Mr Ayre acted in breach of that duty and that SunWater was vicariously liable for Mr Ayre’s breach of duty. His Honour found that SunWater did not itself owe a duty of care to Rodriguez and the group members.

9. [9]

   His Honour delivered a further judgment on 29 May 2020 dealing with the calculation of Rodriguez’s damages, the apportionment of Rodriguez’s judgment and the group members’ claims among the defendants.

10. [10]

    SunWater, Seqwater and the State of Queensland appealed against Beech-Jones J’s decisions. Rodriguez filed a cross-appeal.

11. [11]

    On or about 29 April 2021, prior to the hearing of the appeal, SunWater and the State of Queensland entered into a Deed of Settlement with Rodriguez. Under the terms of the Settlement Deed, SunWater agreed to pay a portion of an agreed sum in settlement of Rodriguez’s and the group members’ claims in the class action proceedings and the appeal brought by SunWater and the State of Queensland.

12. [12]

    In January 2011, SunWater maintained with the second and third defendants (the “QBE Underwriters”) a combined policy of general liability and professional indemnity insurance titled “General and Products Liability and Professional Indemnity Policy” (the “Primary Policy”).

13. [13]

    In relation to the general liability, SunWater also maintained various levels of excess cover. This included an “Excess Liability Policy” with the plaintiff, Liberty Mutual Insurance Company, Australia Branch, which provided cover in respect of the first excess layer of insurance under SunWater’s general liability insurance (the “Liberty Policy”).

14. [14]

    There were a number of excess layer insurers beyond Liberty, but none are relevant for present purposes.

15. [15]

    There were no excess layer insurers in relation to the professional indemnity insurance under the Primary Policy.

16. [16]

    Liberty’s obligation to indemnify SunWater under the Liberty Policy was expressed to be “in accordance with the applicable terms, exceptions, conditions and endorsements” of the Primary Policy on a “follow form” basis.

17. [17]

    Accordingly, the terms of the Liberty Policy were the same as those in the general liability component of the Primary Policy.

18. [18]

    One of those terms was General Exclusion 8 (the “Exclusion”) which excluded liability for claims:

19. [19]

    Liberty seeks declaratory relief to the effect that the Exclusion is engaged and that it is not liable to indemnify SunWater in relation to the claims made in the class action proceedings, including pursuant to the Settlement Deed.

20. [20]

    My findings in relation to the meaning and effect of the Exclusion have implications for the QBE Underwriters. It is agreed that I should publish my reasons for my conclusions as to the meaning and effect of the Exclusion and then invite submissions as to what further steps need to be taken in the proceedings.

The Service Level Agreement

1. [21]

   Under the Service Level Agreement, SunWater agreed to provide Seqwater with “flood management services” for the Wivenhoe and Somerset Dams in accordance with, relevantly:

2. [22]

   Clause 3.2 of the Service Level Agreement obliged SunWater to “provide the Service to Seqwater using appropriately qualified and experienced personnel” and to “act in accordance with reasonable directions from Seqwater in respect of SunWater’s performance of the Service”.

3. [23]

   Clause 3.3 provided:

4. [24]

   Clause 6.1 of the agreement provided:

5. [25]

   The Service Schedule to the agreement obliged SunWater to:

6. [26]

   The Service Schedule further provided that:

7. [27]

   As I have mentioned, SunWater’s employee, Mr Ayre, was the Senior Flood Operations Engineer at the relevant time.

8. [28]

   So far as concerns payment, the Services Schedule provided:

9. [29]

   Clause 7 of the Schedule provided for a specified “annual cost” for the “Service … with flood events to be paid for on an hourly rate basis in accordance with” an identified schedule of rates.

10. [30]

    In light of the provisions I have set out at [24], [28] and [29], there is no dispute that such services as SunWater provided under the Service Level Agreement was “for a fee” for the purposes of the Exclusion.

The Manual

1. [31]

   The preface to the Manual stated:

2. [32]

   Clause 1.3 provided:

3. [33]

   Clause 1.7 provided:

4. [34]

   The Manual recited that pursuant to the provisions of the Water Supply (Safety and Reliability) Act 2008 (Qld), Seqwater was “responsible for operating and maintaining the dams in accordance with this Manual”. [3]

5. [35]

   Under the Manual it was Seqwater’s obligation to:

6. [36]

   Seqwater nominated SunWater’s employee, Mr Ayre, for that role.

7. [37]

   The Manual provided that “the responsibilities of the Senior Flood Engineer” [6] were to:

8. [38]

   Clause 2.5 of the Manual provided for the qualifications and experience required of engineers, including the Senior Flood Operations Engineer.

9. [39]

   There is no dispute that Mr Ayre had these qualifications and experience.

10. [40]

    An example of the circumstance where Mr Ayre would be obliged to exercise such professional judgment was provided in cl 2.8 of the Manual which provided:

11. [41]

    The Manual set out a large number of “Flood Mitigation Objectives” including, as the first consideration, “the structural safety of the dams” and then “in descending order of importance” the provision of “optimum protection of urbanised areas from inundation” and other matters.

12. [42]

    The Manual recorded that:

Was SunWater rendering professional advice or services to Seqwater?

1. [43]

   There is no dispute that SunWater was providing a “service” to Seqwater.

2. [44]

   Nor is there any dispute that the service that SunWater’s employee, Mr Ayre, provided in his role as Senior Flood Operations Engineer, was a “professional service”.

3. [45]

   Mr Sheahan QC, who appeared with Mr Kidd SC and Mr Dooley for SunWater, accepted in terms that “Mr Ayre’s relevant activities were in the context of him rendering professional services” and that “[h]e had to exercise professional judgment”.

4. [46]

   However, Mr Sheahan submitted that SunWater was not itself rendering a professional service but was merely “providing people to provide services”.

5. [47]

   Mr Sheahan submitted that the Service Level Agreement is “properly characterised … as a labour hire arrangement rather than a professional services arrangement”.

6. [48]

   Mr Sheahan put it this way:

7. [49]

   I do not agree.

8. [50]

   It is true that:

9. [51]

   But it was SunWater that was providing the Flood Management Services to Seqwater.

10. [52]

    One of those services was to provide “appropriately qualified and experienced personnel”. [9]

11. [53]

    The standard of service that SunWater itself was to provide was that “expected of a contractor experienced in the provision of the Service”. [10]

12. [54]

    Thus, the reality was that SunWater was, by its employee, providing professional engineering services.

13. [55]

    I do not see anything in Beech-Jones J’s findings inconsistent with this conclusion.

14. [56]

    Mr Sheahan drew attention to these passages from Beech-Jones J’s judgment: [11]

15. [57]

    His Honour was here addressing the question of whether Seqwater owed Rodriguez and the other group members a duty of care. His Honour’s point was that it did not follow from the fact that SunWater was “provid[ing] professional engineering services” that it owed a duty of care to Rodriguez and the group members.

16. [58]

    Thus, his Honour held SunWater was “not an ‘engineer’” and did not promise to act “as an engineer” but, rather, provided “professional engineers and other support to enable the performance of flood management services ‘in accordance with the Manual’”. It was for those reasons his Honour held SunWater did not have a duty of the kind referred to in Drexel London.

17. [59]

    However, as I read his Honour’s observations, although he rejected Rodriguez’s submission that SunWater owed the group members a duty of care, he nonetheless accepted the premise of Rodriguez’s submission; namely, that SunWater was “contracted to provide professional engineering services”.

18. [60]

    His Honour then concluded that:

19. [61]

    I do not see that it follows from these conclusions that his Honour held, or that I should conclude, that SunWater was not providing professional engineering services under the Service Level Agreement.

20. [62]

    In my opinion, it was.

Is the Exclusion confined to professional advice or service rendered to Seqwater?

1. [63]

   On behalf of SunWater it was submitted that, on its proper construction, the Exclusion only applies to claims made by the recipient or intended recipient of the professional advice or service given for a fee by SunWater: that is, Seqwater.

2. [64]

   There was no dispute as to the relevant principles to be applied when construing an insurance contract.

3. [65]

   They are that:

4. [66]

   In oral submissions attention was focussed on the text of the Exclusion.

5. [67]

   This was apt. As has been correctly stated:

6. [68]

   My attention was directed to the manner in which exclusions have been construed in the decisions of the Western Australia Court of Appeal in Fitzpatrick v Job t/as Jobs Engineering, [21] the New South Wales Court of Appeal in Vero Insurance Ltd v Power Technologies Pty Ltd, [22] the later decision of the New South Wales Court of Appeal in Transfield Services (Australia) v Hall [23] and of Rein J in Limit (No 3) Ltd v ACE Insurance Ltd. [24]

7. [69]

   In both Fitzpatrick and Vero the exclusion clause under consideration was one expressed in terms of professional duty.

8. [70]

   Thus, in Fitzpatrick the exclusion clause was in respect of:

9. [71]

   In Vero the exclusion clause was in respect of:

10. [72]

    In both those cases, the Court held that the exclusion clause was not engaged in relation to a claim made by a third party against the insured for personal injury suffered by reason of an act or omission of the insured in breach of the insured’s general law duty owed to the plaintiff because that claim did not arise out of a breach of professional duty by the insured.

11. [73]

    In Fitzpatrick, Mr Fitzpatrick was injured when using a machine manufactured by the insured.

12. [74]

    In Vero, Mr Barlow was injured when he inhaled asbestos released when the insured performed maintenance work on equipment that it manufactured at a power station.

13. [75]

    In Vero, the Court of Appeal followed the decision in Fitzpatrick. Beazley JA (with whom Campbell JA and Harrison J agreed) said: [25]

14. [76]

    Thus, in both Fitzpatrick and Vero it was held, in effect, that whether or not the insured was in breach of its professional duty to its client, the claim made by the third parties (Mr Fitzpatrick and Mr Barlow) against the insured was not a claim that arose from any such breach of professional duty. Rather those claims were held to arise from the common law duty that the insured owed the third party. For those reasons, the Court held that the exclusion in question was not engaged.

15. [77]

    Unlike the exclusions considered in Fitzpatrick and Vero, the Exclusion in this case is expressed by reference to claims arising out of the rendering of professional advice, rather than claims arising out of a breach of professional duty.

16. [78]

    To repeat, the Exclusion provides that the insurers are not liable for claims:

17. [79]

    Similar clauses were considered by the Court of Appeal in Transfield and in Limit.

18. [80]

    The exclusion in Transfield was in respect of liability:

19. [81]

    The exclusion in Limit was: [29]

20. [82]

    Although the exclusions in Transfield and Limit are worded a little differently from the Exclusion in this case, I do not find those differences to be material. There is no dispute in this case that the advice given by Mr Ayre, and thus, as I have found, by SunWater, was professional advice. Nor is there any dispute in this case that the advice given by SunWater was given “for a fee”.

21. [83]

    Mr Darke SC, who appeared with Mr Ng and Mr Jedrzejczyk for Liberty, submitted that there is a material difference between an exclusion for liability for claims arising from a breach of professional duty on the one hand and an exclusion of claims arising out of the rendering of a professional service on the other.

22. [84]

    Mr Darke submitted that the exclusions were textually and conceptually different in nature.

23. [85]

    On the other hand, Mr Sheahan submitted that the “distinction collapses on examination”. Mr Sheehan submitted that both forms of exclusion “operate by reference to the character of the relevant duty that gives rise to liability”; explicitly in the case of a professional duty exclusion and implicitly but, necessarily, also in the case of a professional service exclusion.

24. [86]

    I do see a distinction between the two types of exclusion clauses.

25. [87]

    As Mr Darke submitted, “[o]ne operates by reference to the character of the duty the insured owed and the other operates much more broadly simply by reference to the character of the advice or service”.

26. [88]

    If a claim arises from a breach of professional duty, it is hard to see how it would not also arise from the rendering of the professional service that gave rise to that breach of professional duty.

27. [89]

    But if a claim arises from the rendering of a professional advice or service it might not arise from a breach of professional duty. Indeed, the question of whether it does will depend on how the professional advice or service exclusion is construed.

28. [90]

    If in this case the Exclusion was in respect of claims arising from a breach of professional duty, the decision in Vero would compel the conclusion that Rodriguez’s and the group members’ claims did not arise from a breach by SunWater of its professional duty to Seqwater (if there was such a breach of duty) but, if they did arise at all, from a breach of SunWater’s general law duty to Rodriguez and the group members or from SunWater’s vicarious liability for Mr Ayre’s breach of general law duty; and thus that the Exclusion was not engaged.

29. [91]

    Whether the result is different here depends on how the Exclusion is construed and, in particular, on whether it is to be read down as SunWater submits.

30. [92]

    Thus, the correctness of Mr Sheahan’s submission that there is no distinction between the two types of exclusion clauses assumes, rather than compels, the conclusion that the construction of the Exclusion for which SunWater contends is correct.

31. [93]

    In Limit, Rein J saw a professional service exclusion clause as being wider than a professional duty exclusion clause “because it does not require a breach of duty” but did not see the difference as being material. [30] I would respectfully suggest that this depends on how a professional service exclusion, such as the Exclusion, should be construed.

32. [94]

    I now turn to that question.

33. [95]

    In Transfield, the Court was considering an exclusion which was to the same effect as the Exclusion in this case, albeit, one that was divided into two components.

34. [96]

    In relation to the first component (claims arising out of “the rendering of or failure to render professional advice or service”) Campbell JA concluded that the exclusion was not engaged because advice given by the insured in that case was not “professional” advice.

35. [97]

    The other members of the Court, (Beazley JA and McClellan CJ at CL) did not need to consider this question as they resolved the appeal on a different basis. I will return to this below.

36. [98]

    In reaching his conclusion that this aspect of the exclusion in Transfield was not engaged, Campbell JA referred to both Fitzpatrick and Vero (remembering that Campbell JA was a member of the Court in Vero and joined in the reasons of Beazley JA that I have set out above). Thus, his Honour said:

37. [99]

    His Honour referred to both Fitzpatrick and Vero but only, as I read his Honour’s reasons, to agree with the general proposition that the contra proferentem rule applies in relation to the construction of exclusion clauses, a point that was relevant to his Honour’s conclusion that the advice or service given by the insured in Transfield was not of a “professional” nature.

38. [100]

    His Honour did say [35] that “there is no relevant point of distinction between the present case and Vero, so far as the construction of the exclusion is concerned.” But I do not read Campbell JA as there comparing the texts of the exclusions in Transfield (a professional services exclusion) to that in Vero (a professional duty exclusion). There was no issue in Transfield that the advice was given to the insured’s client. The question in Transfield was whether the advice given was “professional” in nature.

39. [101]

    In relation to the second aspect of the exclusion clause in Transfield (“advice … given for a fee”) Campbell JA addressed the precise question that arises in this case, namely, whether the professional advice exclusion should be construed as being confined to claims made by the party to whom the advice was given.

40. [102]

    His Honour recited [36] the submission made to that effect for the plaintiff:

41. [103]

    His Honour continued:

42. [104]

    Here, Campbell JA, who as I have said was a member of the Court in Vero, explicitly rejected the construction of the exclusion as being confined to or by “the person to whom the advice was given, or the person who commissioned the advice”. That is in substance the submission that is made on behalf of SunWater in this case.

43. [105]

    It is true that, in this element of the exclusion in Transfield, reference was made to advice “given” rather than (as in the first element of the exclusion in Transfield, and also in this case) to advice “rendered”. But I see no relevant distinction between those two words in that context.

44. [106]

    McClellan CJ at CL, with whom Beazley JA agreed, did not address this question as his Honour concluded that the insured was not giving “advice” at all and that, for that reason, and contrary to Campbell JA’s conclusion, the exclusion was not engaged.

45. [107]

    In the result, Campbell JA was in dissent in concluding that, overall, the exclusion clause was engaged and that the insured was not liable to indemnify the insured.

46. [108]

    I think it is fair to say, as Mr Sheahan submitted, that it cannot be concluded that Beazley JA and McClellan CJ at CL must be taken to have accepted Campbell JA’s conclusion that the second element of the exclusion ought not be read down to apply only to claims by the person to whom the advice was given. As Mr Sheahan submitted, having seen a different answer to the insurer’s case, their Honours did not address that question and decided the question of the insurer’s liability to indemnify the insured on a different basis.

47. [109]

    However, the fact remains that a judge of appeal has expressed the emphatic conclusion that there was no “textual support” for the narrow construction of the exclusion in Transfield for which the plaintiff in that case contended.

48. [110]

    As I have said, I see no relevant distinction between the exclusion clause in Transfield and the Exclusion here.

49. [111]

    In Limit, Rein J expressed an opinion that I see as being inconsistent with and different to that expressed by Campbell JA in Transfield.

50. [112]

    Rein J said of the decision in Transfield:

51. [113]

    His Honour continued:

52. [114]

    I would respectfully suggest that nothing said by the Court in Transfield compelled the conclusion to which Rein J came in the last quoted paragraph ([187]) and that, to the contrary, the opinion expressed by Campbell JA as to the second element of the exclusion in Transfield is inconsistent with that conclusion.

53. [115]

    Further, to the extent that Rein J placed emphasis (in [186]) on the fact that the exclusion in Limit was in respect of services “rendered”, his Honour appears not to have appreciated the force of Campbell JA’s conclusions in respect of the relevantly indistinguishable provision in Transfield (which although using the word “given” rather than “rendered”, was to the same effect).

54. [116]

    Faced with conflicting authority on the question, I feel obliged to follow that of Campbell JA because, although his Honour was in dissent on the result in Transfield, the relevant opinion he expressed was not dissented from by the other members of the Court and, to that extent, has the status of appellate authority.

55. [117]

    In any event, I agree with Campbell JA’s view as it appears to me to be faithful to the text of the exclusion. To put that another way, I agree with Campbell JA that there is no “textual support” for reading down the Exclusion so that it applies only to claims made by the intended recipient of the “professional advice or service”: i.e. Seqwater.

56. [118]

    SunWater also submitted in writing that the context in which the Exclusion appears as 1 of 11 general exclusions in the Primary Policy supports its confined construction of the Exclusion.

57. [119]

    The other exclusions referred to were those relating to claims arising out of war, terrorism, radiation and asbestos, operations in the United States, employer’s liability, environmental pollution and the like.

58. [120]

    I cannot see what light the wording of those other exclusions sheds on the proper construction of the Exclusion.

59. [121]

    SunWater also in writing contrasted the words “arising out of” in the Exclusion with words used in relation to other exclusions such as “arising directly or indirectly, caused by, contributed to by, or arising from” (used in General Exclusion 4 concerning “radiation”), or “arising out of or in connection with” (used in General Exclusion 10 concerning operations in the United States).

60. [122]

    I do not see how these matters assist in the construction of the Exclusion. Indeed, Mr Sheahan accepted in oral submissions that the “conservative” construction for which he advocated involved reading the Exclusion as if it referred to claims arising “directly” out of the rendering of a professional advice or service, or, more extremely, as if it referred to claims “for” the rendering of such services.

61. [123]

    I see no textual support for such a construction.

62. [124]

    I have found, contrary to SunWater’s submissions, that SunWater did render professional advice or a professional service to Seqwater.

63. [125]

    It follows from that conclusion, and from my conclusion as to the proper construction of the Exclusion, that SunWater’s liability under Beech-Jones J’s judgment is one “arising out of” the rendering of that professional advice or service, notwithstanding the fact that Beech-Jones J held that SunWater did not itself owe a duty of care to the group members.

64. [126]

    In any event, as Mr Darke pointed out in reply, SunWater’s ultimate liability now arises under the Settlement Deed. It is clear that, based on my findings, SunWater’s liability under the Settlement Deed arose out of its rendering of a professional advice and service.

65. [127]

    Finally, it was submitted on behalf of SunWater that the narrow construction of the Exclusion it advocated would give better effect to the apparent commercial purpose of the insurance policies.

66. [128]

    SunWater drew attention to the opening words of the “Business Description” in the Primary Policy:

67. [129]

    SunWater submitted:

68. [130]

    However, the description of SunWater’s business also includes:

69. [131]

    The latter descriptors of SunWater’s business contemplate provision of a range of services and activities which could not be described as “professional”.

70. [132]

    Further, the full “Business Description” appears three times in the Primary Policy; once in the general wording applicable to both the general insurance and the professional indemnity insurance cover, and then in the wording specifically applicable to the general insurance and professional indemnity insurance cover.

71. [133]

    For that reason, I find the element of the “Business Description” on which SunWater relied to be neutral in relation to the proper construction of the Exclusion.

72. [134]

    I also find it to be neutral on the construction question the fact that SunWater’s “Estimated Turnover” as recorded in the Primary Policy greatly exceeded its “Estimated Professional Fees” because, again, this material is recorded in that part of the wording that governs both general liability and professional liability cover provided by the Primary Policy.

73. [135]

    In my opinion, the wider point is that the Exclusion is, in effect, an exclusion in relation to claims for professional negligence. In oral submissions, Mr Sheahan accepted that this was “the basic thrust” of the Exclusion.

74. [136]

    SunWater has claimed indemnity under the general liability provisions of the Primary Policy. But, as I have said, the Primary Policy also provided professional indemnity cover. Unlike the circumstances considered by Rein J in Limit, SunWater’s professional indemnity cover did not arise from “another source” [39] but from the very policy the subject of SunWater’s claim for indemnity.

75. [137]

    A construction of the Exclusion as excluding liability for a claim in professional negligence in circumstances where the same policy provided professional indemnity cover, does not seem to me to produce an uncommercial or unreasonable result or to circumscribe unduly the ambit of the cover afforded under the general liability provisions in the Primary Policy.

76. [138]

    It may be that the cover afforded by the professional indemnity component of the Primary Policy would not necessarily be contiguous with that excluded by the Exclusion as I have construed it. But the fact remains that the Primary Policy has the two elements to which I have referred so that the natural reading of the Exclusion so as to exclude, in effect, claims for professional negligence sits comfortably within the structure of the Primary Policy as a whole.

77. [139]

    I do not accept Mr Sheahan’s submission that “it makes more sense for the exclusion to be narrow than to be broad in the context of the PI policy” because “by having a narrower exclusion … you funnel the true professional negligence claims into the professional negligence indemnity policy with whatever conditions, exclusions, limits, sub-limits and so on” as may be in the professional negligence policy. It appears to me that the position is the reverse of that suggested by Mr Sheahan: it is the broader view of the Exclusion that would have this effect.

Conclusion

1. [140]

   For these reasons, my conclusions are SunWater was rendering a professional advice or service and that, on its proper construction, the Exclusion is not confined to claims made by the recipient or the intended recipient of the professional advice or service in question.

2. [141]

   In my opinion the claim made against SunWater by the group members in the class action proceedings, now resolved by the Settlement Deed, is a claim “arising out of the rendering of failure to render professional advice or service for a fee” and is excluded from cover by the Exclusion in the Primary Policy.

3. [142]

   I invite the parties to confer and agree on the steps to be taken next.