Professional Services: Do You Know Them When You See Them?

The complex medical field with its often personalized treatments can be more difficult to define than other professions

“Professional services” can have many different connotations, ranging from racy “professional” call girls, a subject recently in the headlines and on the Internet due to various political scandals, to the more mundane accountants, doctors, lawyers and engineers. From an insurance perspective, liability arising out of “professional services” is generally covered under specialty policies — such as malpractice, and errors and omissions policies — rather than general liability policies.

Not surprisingly, the starting point for coverage under these specialty policies is whether the liability has some connection with the rendering of, or failure to render, “professional services.” While this may seem, on the surface, as though it should be a relatively easy determination to make, and in many cases may be obvious, the term “professional services” can be surprisingly difficult both to define and to apply, particularly when the alleged liability at issue arises out of an act or acts that are performed by a “professional” and have some involvement or relation to a professional service, but are not at the core of that service.

The field of medicine, in part due to its complexity and in part due to the highly personal nature of the treatment and services being provided, seems to provide examples of this difficulty more often than other professions.

As an illustrative list, courts construing coverage under medical malpractice liability policies have had to determine whether the following acts fall within the coverage for medical professional services: sexual assault; sexual harassment; sexual relations arising out of counseling services; humiliation of a patient while under anesthesia; injecting a needle into the arm of a blood donor; the giving of a positive recommendation of a fellow physician to a potential employer; alleged defamation of one medical professional by another; transporting a patient in a defective wheelchair; the placement or positioning of a patient prior to or after treatment; the physical restraint of a patient, the failure to maintain a window to prevent the possible suicide of a psychiatric patient; the decision to attach side rails to a hospital bed; and counting sponges or other items taken out of a patient at the conclusion of surgery.

Courts Consider the Act, Not the Title

Across the country, the courts, by and large, have articulated the same or similar standard to determine if a particular act or omission is of a “professional” nature. Almost uniformly, the courts agree that in making this determination, the act itself must be considered and not the title or character of the party performing the act.

Louisiana, which is fairly representative, has held that professional services “in its usual connotation, means services performed by one in the ordinary course of his profession, on behalf of another, pursuant to some agreement, express or implied, and for which it could reasonably be expected some compensation would be due.” [Aker v. Sabatier, 200 So. 2d 94, 97 (La. App. 1st Cir.), writ denied, 202 So. 2d 657 (La. 1967)]

A similar definition quoted by many courts is that professional services are acts or services “arising out of a vocation, calling, occupation, or employment involving specialized knowledge, labor or skill which is predominately mental or intellectual, rather than physical or manual.” [Marx v. Hartford Accident & Indemnity Co., 157 N.W. 2d 870 (Neb. 1968). See also Medical Records Associates Inc. v. American Empire Surplus Lines Ins. Co., 142 F. 3d 512, 514 (1st Cir. 1998) (noting that the Marx definition of professional acts or services is “widely accepted”)]

Specific factors typically considered in determining if a particular act or omission is of a “professional” nature include “whether the act involved the exercise of professional judgment or required the exercise of a particular skill or discretion acquired by special training or whether the act could have been done by an unskilled or untrained person.” [North American Treatment Systems, Inc. v. Scottsdale Ins. Co., 943 So. 2d 429, 447 (La. App. 1st Cir. 2006) (citing American Casualty Co. v. Hartford Ins. Co., 479 So. 2d 577, 579 (La. App. 1st Cir. 1985))]

Stated another way, ordinary tasks, even when performed by a professional, are not considered “professional” if they can be done by one lacking the relevant training and expertise. [Medical Records Associates Inc. v. American Empire Surplus Lines Ins. Co., 142 F. 3d 512, 514 (1st Cir. 1998)]

Or, as one court has stated, professional services are those services that use the inherent skills typified by the profession in question. [Gregg & Valby, L.L.P. v. Great American Ins. Co., 316 F. Supp. 2d 505 (S.D. Tex. 2004)]

Fine Distinctions

The application of these factors to specific circumstances sometimes leads courts to draw fine distinctions. For example, one Louisiana court held that the raising or failure to raise a side rail on a hospital bed was not a professional service, but suggested that the initial decision to attach the side rail could involve professional judgment, stating: “While the initial decision to attach the side rails to the bed may have involved professional judgment, once the attending physician issued the order the professional aspect was complete.” D’Antoni v. Sara Mayo Hospital, 144 So. 2d 643 (La. App. 4th Cir. 1962).

Non-medical cases generally apply the same or a slightly augmented definition of or standard for determining “professional services.” In such cases, it has been noted that the term “professional services” suggests “something that is pursued regularly as one’s vocation and, also, to at least some extent, the pursuit of a vocation which requires specific formal education or special skills or training.” [Sommers v. State Farm Fire & Casualty Co., 764 So. 2d 87, 91 (La. App. 4th Cir. 2000)]

One Louisiana court, considering whether a consulting forester’s work in marking trees fell under a “professional services” exclusion, noted that professional services are those that require specialized training and judgment or the use of specialized tools and instruments. [Merlin B. Smith Inc. v. Travelers Property Casualty, 811 So. 2d 1097 (La. App. 2 Cir. 2002)]

Court Interpretation

In relying on decisions by courts as to whether a particular act or failure to act constitutes a “professional service,” it is necessary to be cognizant of whether the court in question is interpreting a coverage clause or an exclusion. In general, coverage under an insurance policy is interpreted broadly and exclusions are construed strictly and narrowly. For this reason, although the reasoning and outcome should nonetheless be consistent, an act or omission may be found by one court to be covered as a “professional service” under a malpractice or similar specialty policy, but another court may find that the same or a similar act is not excluded from the coverage of a general liability policy under a “professional services” exclusion.

Additionally, the language of the policy in question always has the potential to lead to a conclusion that appears contrary to the accepted understanding of what constitutes “profession services.” For example, the policy language may cover or exclude acts or omissions which are “related to” or “in connection with” the rendering of professional services. Such language may create an ambiguity as to whether an act or omission that in itself is not considered to be a “professional service” is nonetheless covered or excluded based on its connection with or to an acknowledged “professional service.” Or, the policy may list certain acts generally acknowledged to be “professional” in nature as specifically excluded from coverage.

Distinguish ‘Act’ From ‘Status’

Further, with respect to medical liability policies, most states have statutes which limit recoveries available for medical malpractice. The principal, if not the primary, reason given for the passage of these statutes is to stabilize medical malpractice insurance rates. Often, the courts in states with such statutes will look to those statutes for guidance in determining whether a particular act or omission qualifies as a “professional service” for purposes of coverage under medical malpractice liability insurance policies.

Thus, for insurance coverage purposes, discerning whether an act or failure to act constitutes a “professional service” may not be the simple task that one might assume. Certainly, the professional quality of some acts, such as performing a surgical procedure, will be obvious. Nonetheless, the temptation to place too much emphasis on the status of the actor must be avoided and the nature of the act in question and the wording of the policy in question should be examined closely. Only then, can one confidently predict whether a “professional service” exists for insurance coverage purposes.

Topics Louisiana Excess Surplus Training Development Medical Professional Liability