As all insurance agents know, the intention of the professional services exclusion is to ensure that professional liability claims are excluded from coverage under a general liability policy and covered under a professional liability policy (see here). Underwriters have used professional services exclusions on general liability (GL) policies for years and have done so effectively. But there are gray areas, as two recent court rulings demonstrate.
An appellate court case in Minnesota (see here) involved an investment management firm that sought coverage for claims under its GL policy as a result of improprieties in the management of two trust accounts. The management firm tried to claim that it did not provide professional services and therefore the professional services exclusion should not apply and the GL policy should cover all damages.
The court ruled that the management firm did in fact fall under the professional services exclusion as the firm referred to its “client base” on its renewal application. The court also found that serving as a trust manager in the firm required specialized skill that is predominantly intellectual rather than physical and clearly involves professional services under Minnesota law.
In an unrelated case, the Appellate Division of the Superior Court of New Jersey (see here) found that the professional services exclusion did not apply to a lawsuit that resulted from the acts of a company’s safety manager. The court considered the role of a safety manager to be one that was neither authorized by law, nor regulated by law.
The court ruled against the insurer in this case as it rejected the assertion that the professional service exclusion applies because the safety manager did not hold a degree in engineering or architecture; had not engaged in any prolonged formal course of training; and his training involved more general academic instruction rather than a professional paid a fee for specialized service.
Both of these cases demonstrate that the professional services exclusion can work effectively, and the first shows the importance of seeking professional liability insurance coverage in addition to GL for professional firms.
Specialty Insurance Expertise: Tennant Risk Services
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