By Meghan Grant and Caitlin J. Flanagan
Commercial general liability policies often contain a professional services exclusion. While not monolithic, the exclusion generally precludes coverage for bodily injury and property damage that arises “out of the rendering of or the failure to render professional services.” McCarthy v. Berman, 95-1456 (La. 2/28/96), 668 So. 2d 721, 723-24. The exclusion may identify specific types of services that are considered “professional,” including legal, medical, supervisory, inspection, architectural, or engineering. The purpose of the exclusion is to ensure that CGL policies do not cover liability that is unique to such “professionals” and that is more appropriately addressed under a special policy that “provide[s] protection for professional errors and omissions.” Id. at 724.
Professional services “involve discretion acquired by special training and the exercise of special judgment.” Cochran v. B.J. Servs. Co. USA, 302 F.3d 499, 507 (5th Cir. 2002) (interpreting Louisiana law) (quoting Thermo Terratech v. GDC Enviro-Solutions, Inc., 265 F.3d 329, 336 (5th Cir. 2001)). A “routine task that does not require specialized instructions, and which ordinarily is performed by . . . non-professionals” should not fall within the scope of the professional services exclusion. Compare Cochran, 302 F.3d at 501-08 (holding that company man who was injured when removing a cement head from an oil rig was not a “professional” within the meaning of the policy’s exclusion), with N. Am. Treatment Sys., Inc. v. Scottsdale Ins. Co., 2005-0081 (La. App. 1 Cir. 8/23/06); 943 So. 2d 429, 433-38, 446-48 (holding that project manager for waste water treatment plant rendered professional services subject to the exclusion).
According to the U.S. Fifth Circuit in Cochran v. B.J. Servs. Co. USA, under Louisiana law, “the nature of the particular service allegedly negligently performed (or not performed), and whether that service is recognized as requiring specialized training or expertise” is determinative of whether the service is “professional.” 302 F.3d at 506. Cochran considered whether, at the time of the accident, the alleged professional services: (1) required “special knowledge and technical expertise” and (2) could have been performed by an “unskilled or untrained” employee. Id. at 505 (quoting Thermo Terratech, 265 F.3d at 336); see also N. Am. Treatment Sys., Inc., 943 So. 2d at 447. Thus, the Fifth Circuit was not concerned with the “the title or trade of the insured contractor or its employees, or the contractor’s overall job description” but rather the type of service provided. Cochran, 302 F.3d at 506; see also N. Am. Treatment Sys., Inc., 943 So. 2d at 447.
Cochran outlines a fact-intensive analysis that can cause discomfort for policyholders. When negotiating coverage, the policyholder should consult its broker if there is uncertainty as to whether the policyholder’s services may be “professional.” First, the broker may negotiate a special endorsement to the CGL policy to clarify that the policyholder’s usual services are not “professional,” as the term is used in the exclusion. Arguably, the underwriter should feel comfortable committing to this position if it does not intend to apply the exclusion. Second, the underwriter may offer “contingent” coverage that applies only in limited situations when the non-professional policyholder acts as a professional. If doubt remains, the policyholder also may consider the purchase of a professional liability policy. Ultimately, the policyholder looking for coverage should be aware of the risks of an exclusion defense in the event of a claim and should work with its broker to insure against that risk.