Defining ‘Professional Services’ For Specialty Policies Not Always Easy

Professional services” can have connotations ranging from racy “professional” call girls 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 a connection with the rendering of, or failure to render, “professional services.” However “professional services” can be difficult to define and to apply, particularly when the alleged liability at issue arises out of an act(s) 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 the personal nature of treatment, often provides examples of the difficulty.

As an illustrative list, courts construing coverage under medical malpractice liability policies have had to determine whether the following fall within the coverage for medical professional services: sexual assault; 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 of a patient prior to or after treatment; physical restraint of a patient; failure to maintain a window to prevent the possible suicide of a psychiatric patient; and counting sponges taken out of a patient at the end of surgery.

The Act, Not the Title

Courts by and large have articulated the same or similar standard to determine whether an act or omission is “professional.” Almost uniformly, courts agree the act must be considered, not the title or character of the party performing the act.

Louisiana 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 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). Also Medical Records Associates Inc. v. American Empire Surplus Lines Ins. Co., 142 F. 3d 512, 514 (1st Cir. 1998)]

Factors typically considered in determining whether an act or omission is “professional” 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)]

Stated another way, ordinary tasks, even when performed by a professional, are not “professional” if they can be done by one lacking training and expertise. [Medical Records Associates Inc. v. American Empire Surplus Lines Ins. Co., 142 F. 3d 512, 514 (1st Cir. 1998)] Or, professional services 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. One Louisiana court held that raising or failing to raise a side rail on a hospital bed was not a professional service, but suggested the initial decision to attach the side rail could involve professional judgment.

Non-medical cases generally apply the same or a slightly augmented definition or standard. It has been noted that “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 court, considering whether a consulting forester’s work in marking trees fell under a “professional services” exclusion, noted that professional services 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 an act or failure to act constitutes a “professional service,” be cognizant of whether the court 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. Thus, 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 similar act is not excluded from the coverage of a GL 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 that are “related to” or “in connection with” the rendering of professional services. Such language may create 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” as specifically excluded from coverage.

Distinguish ‘Act’ From ‘Status’

With respect to medical liability policies, most states have statutes that limit recoveries available for medical malpractice to stabilize insurance rates. Often, the courts will look to these statutes for guidance in determining whether an act or omission qualifies as a “professional service” for purposes of coverage under medical malpractice liability policies.

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. 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.

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