D&O and Professional Services

We have covered the role of the professional services exclusion in both General Liability (GL) and Directors & Officers (D&O) insurance policies previously (see here, here and here), but a recent client interaction demonstrates the importance of not taking client education for granted.  The insured was not sure why professional services were excluded from the D&O policies they were reviewing, and actually thought there were defects in the policy forms.  As part of our support of our retail insurance agent client, we pointed out:

D&O policies have a professional services exclusion for a reason, and the inclusion of the professional services exclusion is not a defect in the D&O form(s).  With the exception of a few specially targeted forms, D&O policies do not contemplate covering professional liability exposures.  The reason is that the professional liability exposure is typically different from the D&O exposure and can vary widely between insureds.  The thought is that the professional exposure should be underwritten and covered separately – within an E&O policy.  The intention is to motivate a discussion of exposures and cover professional services under a separate E&O policy.

Other sources support this:

• As part of a D&O policy, the intent of the exclusion is similar: to preclude coverage of traditional professional services that are sometimes performed by individuals covered by the D&O policy but should be separately insured. (IRMI: see here)
• A court case summary touched on this as well: The opinion highlights the need to ensure that potential coverage gaps created by the professional services exclusion are bridged by errors and omissions coverage.  (STB Law:  see here)

It is relatively easy to obtain E&O coverage for all types of professional exposures, but the exposures should be underwritten and covered in a policy form designed specifically for the exposure.

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Comments

[Sheila]

Really like the blog, appreciate the share!