The meaning of the term “professional services” is important, for it influences borderline coverage and claim situations. Its meaning helps to determine whether a certain act or service is in keeping with the primary role of a professional and, therefore, rightfully within the scope of professional liability insurance, or, looking at it from the opposite viewpoint, whether the act or service is akin to a premises and operations exposure and, therefore, a subject of general liability insurance.

The number of actual and potential situations in which this issue arises cannot be counted. The following are typical.

A registered nurse is employed by a sanatorium. She has her own nurses professional liability policy and the sanatorium has its own hospital professional liability and CGL policies. If the nurse fails to see that the side rails of a patient's bed are in place as ordered by the sanatorium or one of its physicians and the patient is injured, several complex questions may arise. If the sanatorium has its professional liability policy with one insurer and its CGL policy with another, which insurer is obligated to protect the sanatorium? The presence of the bed is clearly a premises exposure but is setting the rails a routine operation or a professional act? If the nurse is sued, will the insurer providing her nurses' professional liability policy respond? Suppose the sanatorium had included all of its employees as additional insureds under its CGL policy, will this coverage protect the nurse?

Another example is the architect who has E&O coverage and CGL coverage with different insurers. If, while inspecting a construction site with its owner, the architect steps on a board that injures the owner, is the architect covered by the E&O policy or the CGL policy?

A final example concerns a hotel that also operates a sauna bath. It has a CGL policy covering its operations. But because of the sauna bath, there is a policy exclusion for bodily injury and property damage due to the rendering of or failure to render any professional service. If a hotel guest, following her doctor's prescription and with the aid of a hotel employee assigned to assist bathers, is injured while in the bath, is the hotel protected under its CGL policy?

There is some judicial direction in trying to address these issues. In Aker v. Sabatier, 200 So. 2d 94 (1967) a Louisiana appeals court stated that “the term professional services means service performed by one in the ordinary course of practice of his profession, on behalf of another, pursuant to some agreement, express or implied, and for which it could be reasonably expected some compensation would be due”. In another case for a Louisiana appeals court, D'Antoni v. Sara Mayo Hospital, 144 So. 2d 643 (1962), it was stated that “in determining whether a particular act is of a professional nature, we must look, not to the title of or the character of the party performing the act, but to the act itself”. (Note that this case was overruled, but on grounds other than professional versus general liability coverage; the dicta pertaining to acts of a professional nature remains valid.)

These statements are not the final word on the meaning of professional services of course, but they can serve as a base upon which to build a clearer understanding of just what the nature of a professional service is, and, thus, help to distinguish between a professional liability exposure and a general liability exposure.

In some decisions, the courts focus primarily on the service or act performed and whether it is of a professional nature.

In American Casualty Company v. Hartford Insurance Company, 479 So. 2d 577 (1985), the court decided that both the general liability insurance policy and the professional liability insurance policy applied to the claim. A patient fell and was injured while climbing onto an EKG table. The patient's doctor had ordered the EKG exam but was not present when the patient tried to get on the table.

The question before the court was whether the injuries were due to medical or nonmedical services. The court ruled that the general liability insurance applied since the fall of and subsequent injury to the patient were nonmedical in nature. The court further ruled that the professional liability insurance also applied since the doctor failed to furnish medical services to the patient properly, thereby causing injury. In determining whether the particular act that caused an injury here was of a professional nature or a nonprofessional nature, the court looked to the act itself and saw both.

 

In Northern Insurance Co. of New York v. Superior Court for the City and County of San Francisco, 154 Cal. Rptr. 198 (1979), an insurer under a general liability policy was not obligated to defend an insured doctor in a suit brought against him by a patient for the doctor's mistake in performing an abortion on the patient instead of examining her for her pregnancy condition. The California court of appeal held that this service came within the policy clause that excluded coverage for bodily injury or property damage due to the insured's rendering of or failing to render any professional service. The argument that coverage existed because the injury resulted from an administrative error of the insured's clerical employee was held by the court to be without merit.

It is undisputed, the court stated, that a physician has the professional duty to identify correctly a surgical patient before undertaking a particular procedure. That he utilizes the assistance of a nonphysician in the performance of that duty cannot alter the professional nature of the nondelegable duty. Thus, the court concluded that the injury to his patient occurred during and as a direct result of the performance of professional services.

In Danyo v. Argonaut Insurance Company, 464 A.2d 501 (1983), an attorney brought suit against a doctor for loss of a contingent fee as a result of the doctor's failure to prepare a proper medical report and to testify in court. The Pennsylvania superior court ruled that this came within the coverage of professional liability insurance and not general liability insurance. The terms of the professional liability policy were held to be broad enough to include the type of loss suffered by the attorney through the actions taken (or not taken) by the doctor.

Subsection (1) of the old engineers and architects professional liability exclusion (general liability endorsement GL 21 06) was a subject of argument in the case of Womack v. Travelers Insurance Co., 251 So. 2d 463 (1971).

Action was brought against an engineering firm and its insurer when a bulldozer struck a gasoline pipeline, during road construction. There was an explosion and fire that resulted in property damage, personal injuries, and death. The incident occurred adjacent to the claimant's property; she was seriously injured and her husband was killed. The general liability policy of the engineering firm, the insured, contained the engineers, architects, and surveyors professional liability exclusion.

The contract for professional services between the engineering firm and the municipality indicated that the engineers were retained to prepare preliminary plans and contract plans and specifications for the improvement of a road. Location of the pipeline was shown on the profile of the road but its depth was not shown on the cross section of the plans. The engineers did not send any plans or prints to the appropriate utility for verification of the location nor did they in any way attempt to locate the depth of the pipeline in relation to the ground level. Although it was conceded that the policy did not insure against liability arising out of professional malpractice, it was argued that the negligent acts complained of were administrative rather than professional in nature, and, therefore, covered by the policy.

The Louisiana court of appeal would not accept this argument, however. Even if it were assumed that the engineers were negligent in failing to include such information on the plans, the court held that it cannot be disputed that the inclusion of such information is a step in the preparation of plans and the preparation of plans is specifically excluded (by means of the aforementioned endorsement) from the coverage of the policy.

Albert J. Schiff Associates Inc., v. Flack, 417 N.E.2d 84 (N.Y. 1980) concerned an insurance agent's professional liability policy. The insured had been sued by another insurance agent for allegedly using a marketing plan developed by that agent without permission. The professional liability carrier declined coverage based on the idea that the dispute did not involve a professional service, and this even though the insured did render services to potential customers by utilizing the marketing plan. The New York court of appeals agreed and said that “the renting of an office, the engagement of employees, arrangements to expand the size of one's activities may all have some connection with a covered business or profession. But, while they may set the stage for the performance of business or professional services, they are not the professional activities contemplated by the special coverage. An errors and omissions policy is intended to insure a member of a designated calling against liability arising out of the mistakes inherent in the practice of that particular profession or business.” This case distinguishes between acts undertaken by a professional as a professional from other acts.

Blumberg v. Guarantee Insurance Co., 238 Cal. Rptr. 36 (1987) was a California case involving a dispute between former law partners that was tendered to legal malpractice insurers. The court of appeals found that there was no professional liability coverage in this instance based on the conclusion that Blumberg was not rendering professional services for others, but was acting in his capacity as a law partner. The court stated that “it can not be said that a law partner acting in his capacity as a partner is performing a professional service for others in his capacity as a lawyer”.

In Bank of California , N.A. v. Opie, 663 F.2d 977 (1981), a federal court tried to define the term “professional services”. The court stated that “a professional obviously performs many tasks that do not constitute professional services; to be considered a professional service, the conduct must arise out of the insured's performance of his specialized vocation or profession. To take an extreme example, an attorney's failure to pay for office equipment constitutes a breach of contract, not an omission in professional services, regardless of how essential the equipment may be to the attorney's law practice. To be covered, the liability must arise out of the special risks inherent in the practice of the profession”.

On the authority of the following cases at least, professional liability insurance is required in order to cover liability arising out of defective or negligently adjusted equipment peculiar to professional services—a physician's examination table, dentist's chair, etc.—whether the act (or failure to act) proximately giving rise to a claim was a “professional service” or not. Note that the case law is still valid despite the age of the decisions.

Antles v. Aetna Casualty and Surety Co., 221 Cal.App.2d 438 (1963) involved an injury to a patient when a heat lamp used in treatment became detached from the wall, fell on the treatment table, and burned the patient's back. In considering whether the defective attachment of the lamp was a mechanical act or a professional service, the court ruled that the crucial factor was whether the injuries occurred “during the performance of professional services.” Since the court found that the injury had been sustained in such a manner, there was no coverage under the general liability policy. (For an opposite holding in a case involving similar circumstances, see the Keepes case, below.)

In Brockbank v. Travelers Insurance Co., 207 N.Y.S.2d 723 (1960), the insured operated a convalescent home and had a general liability policy covering the operations. When a claim was made that a nurse failed to adjust the sideboards of a patient's bed, a New York supreme court held that the alleged negligence constituted “nursing service within the exclusion of malpractice and professional services and was, therefore, not covered.

Knoor v. Commercial Casualty Insurance Co., 90 A.2d 387 (1952), involved an injury sustained when a customer in a beauty parlor was struck by a piece of equipment. Although professional services were not actually being performed at the time, the Pennsylvania superior court held that liability for this accident was not covered by a general liability policy that excluded “rendering of any professional services.” The Washington supreme court held similarly in Harris v. Fireman's Fund Indemnity Co., 257 P.2d 221 (1953). This case involved a judgment based on a defective osteopathic table.

Likewise, the Ohio supreme court in American Policyholders Insurance Co. v. Michota, 103 N.E.2d 817 (1952), stated that maintaining a treatment chair in a proper and safe condition for the accommodation of patients was a service or duty directly connected with the practice by the doctor of his profession as a chiropodist. A patient had been injured when she proceeded to seat herself in a metal hydraulic chair which suddenly rotated causing her to loose her balance and fall to the floor. The court specifically held that the injury was one “arising out of the practice of the insured's profession” and also constituted “an injury resulting from professional service rendered or which should have been rendered.” The insured's professional liability insurer was obligated to defend and pay any judgment rendered.

Of course, any question that concerns itself with professional versus nonprofessional acts is almost certainly resolved as a question of fact. And, as the following three cases attest, certain acts will be perceived as constituting simple negligence, rather than professional incompetence.

This is precisely what the Louisiana court of appeal decided in the previously mentioned case of D'Antoni v. Sara Mayo Hospital, 144 So. 2d 643 (1962). The claimant brought suit against the hospital and its insurer for injuries sustained as the result of falling from her bed. The insurer issued a CGL policy to the hospital that contained an exclusion of coverage for malpractice, i.e., professional incompetence. The court dismissed the action involving the hospital (under the doctrine of charitable immunity) but rendered a verdict against the insurer for the amount of the suit: $25,000.

The insurer argued on appeal that the failure to raise the patient's bed rails was malpractice and, therefore, excluded under the policy. The court concluded, however, that this was negligence and not malpractice. An opinion of the court was that the initial decision of the patient's physician to keep the rails raised may have involved professional judgment, but once the order was issued, the professional aspect of this situation was complete.

The argument in Keepes v. Doctors Convalescent Center, Inc., 231 N.E.2d 274 (1967), also centered around the coverage of a general liability policy with the professional services exclusion. While a child was being prepared for a bath, a nurse's aide left the room and the child came in contact with a heating radiator and sustained burns. In holding the injury covered under the general liability policy, the court stated that the attendant, though a nurse's aide, was working as a maid.

Where a claim gives sufficient notice that the alleged breach of duty may encompass ordinary negligence as well as professional malpractice, a general liability insurer has a contractual duty to furnish defense and to provide insurance coverage in accordance with the policy's provisions. However, in so holding, the New York supreme court, appellate division, in Hartford Accident and Indemnity Co. v. The Regent Nursing Home, 413 N.Y.S.2d 195 (1979), permitted the general liability insurer to reserve its rights to limit coverage pursuant to the policy's malpractice and professional services exclusion. This case involved an injury to a patient who fell from a chair at a nursing home.

In the case of Marx v. Hartford Accident and Casualty Indemnity Co., 157 N.W.2d 870 (1968), the insured's employee, in refilling a hot water sterilizer, mistakenly filled the container with benzine instead of water. The fumes eventually caused an explosion and fire that damaged the building.

The insuring clause of the professional liability policy stated: “To pay on behalf of the insured, all sums the insured shall become legally obligated to pay as damages because of injury arising out of (a) malpractice, error or mistake of the insured, or of a person for whose acts or omissions the insured is legally responsible . . . in rendering or failing to render professional services . . . committed during the policy period in practice of the insured's profession described in the policy.”

Although the insured is responsible for the acts of the employee, the question is whether damage arose out of rendering or failing to render professional services. The supreme court of Nebraska , in holding that no coverage applied under the professional liability policy, concluded that the boiling of water alone was not an act requiring any professional knowledge or training. It was a routine act that any unskilled person could perform. Given the ruling in this case, a general liability policy would have protected the insured for damages caused by the employee whether there was a professional liability exclusion attached to the policy or not.

In Mastrom Inc. v. Continental Casualty Company, 337 S.E.2d 162 (1985), a North Carolina court of appeals held that an accountant's professional liability insurance did not provide coverage for damages arising out of fraudulent activities on the part of the insured. It was decided that such activities did not come within the scope of professional services.

However, depending on the act itself to determine whether it is considered professional does not always guarantee the results mentioned above. In Arizona , a court of appeals, in looking at a claim by St. Paul Fire & Marine that intentional and improper manipulation during gynecological examinations was unprofessional and therefore, not covered by a professional liability policy, decided that the alleged injuries were within the language of the insurance policy and that coverage applied. St. Paul Fire & Marine Insurance Company v. Asbury, 720 P.2d 540 (Ariz.App. 1986) explicitly mentioned the Marx case, above, and rejected the idea that the question of professional liability coverage turns upon the nature of the tortious act and does not include all forms of a doctor's conduct simply because he is a doctor. The tortious conduct took place in the course of and as an inseparable part of the act of providing professional services. So, in this instance, the court looked to the act itself but concluded it was professional in nature and was the essence of the claim.

Can a nonprofessional ever be considered as having performed a service of a professional nature? At least one case shows this to be a possibility though, note, the person causing the injury was a would-be professional in a training setting. The case is Mason v. Liberty Mutual Insurance Co., 370 F.2d 925 (1967).

A patient in an infirmary brought action against the insured under a general liability policy to recover for nerve degeneration and loss of control of the right foot allegedly caused by a hypodermic injection given by a student nurse—in the presence of a surgeon and supervisor of nurses. The insurer denied liability because of the policy exclusion “of injury, sickness or disease due to medical or surgical services or treatment of any service of a professional nature.” The United States district court held for the insurer and the patient appealed.

The United States court of appeals, fifth circuit, upheld the lower court opinion, stating that the injection—though given by a student nurse—was of a professional nature within the meaning of the exclusionary language. The patient argued—to no avail—that while treatment might have been of a professional nature under some circumstances, nevertheless, there was administrative, as distinguished from professional, negligence in permitting a student nurse to administer treatment in an improper manner.

The court stated, however, that Louisiana law controls and the law is “that in determining whether or not a particular act or failure to act is of a professional nature one must look not to the title or character of the party performing the act but to the act itself.” The action—administering a hypodermic injection—is of a professional nature and is excluded.

As previously mentioned, whether a particular act is considered a professional one may mean the difference between coverage and no coverage, depending upon the type of policy in force. Sometimes, however, pinpointing the precise act that leads to injury is not easy.

Exemplifying such a situation is the Louisiana case of Tankersley v. Insurance Company of North America, 216 So. 2d 333 (1968). The insured operated a home for the aged and had a general liability policy covering its operations, but excluding coverage for professional services.

When a patient's condition worsened one day, the three nurses on duty were notified and requested to summon the patient's physician. None of the nurses, however, took steps either to observe the patient or to call the physician. Someone finally did call the physician later in the evening and the patient was removed to a hospital where she died. The patient's daughter subsequently brought suit against the insured alleging that the sole proximate cause of her mother's death was the negligence of the nurses in failing to take notice of the patient's condition and in failing to summon a physician.

When the general liability insurer denied the claim on the basis of the professional services exclusion, the insured argued that the claim was based upon common negligence of the nurses and that this was not a professional malpractice action against the hospital-home for the aged. The crucial question, therefore, was: did the action or failure to act on the part of the nurses make the policy exclusion applicable? To answer this question, the court said it is necessary to look to the nature of the service that the claimant argues was not performed.

The viewpoint of the Louisiana court of appeal was that when the nurses decided not to call the physician, they did more than negligently fail to perform a manual, mechanical operation, they acted in their professional capacity and on their own responsibility as employees of the insured. It can be assumed, therefore, that the nurses exercised their expert judgment in deciding whether to make the call. That decision constituted a failure to render a nursing service and caused the claim to fall within the exclusion of the general liability policy.

A case that sought to determine the proximate act causing injury is Multinomah County v. Oregon Automobile Insurance Co., 470 P.2d 147 (1970). The county had a general liability policy protecting employees of the sheriff's office subject to an exclusion of professional services. Jail authorities failed to give insulin to a diabetic inmate, thereby causing serious injury. When a claim was presented to the insurer, it was denied because the failure to administer insulin was looked upon as a failure to render a professional service—a claim that is a subject of professional liability insurance and not general liability insurance. The insured argued, however, that the acts of its medical technician are those of a craftsman and not of a professional and that administering insulin is something the person could have done for himself had the drug been furnished. Therefore, no professional skill was required.

The court reasoned that if the ability to administer the insulin were the only consideration involved the county's contention would be right. However, it was the court's view that something more was required than physical ability to administer the drug and that was the ability to determine whether the person's physical condition was such that an injection was required. Obviously it was required and the technician did not have the professional competence to recognize it. Since the county failed to provide the service of someone who had the medical training to recognize the seriousness of the person's condition, the county was without coverage for the claim.

Ocean Accident and Guaranty Corp. v. Hertzberg's Inc. 100 F.2d 171 (1938) arose when a customer was awarded damages for injuries caused by electrical treatment administered by a cosmetician in a beauty shop. The court held that the insured's general liability policy did not cover the claim because of the exclusion of injuries sustained “in consequence of professional services.” The court decided that the cosmetician was performing a professional service for the following reason: The word profession means “the occupation which one professes to be skilled in and to follow, and involves the vocation in which a professed knowledge of some department of learning or science is used in application to the affairs of others or in the practice of an art founded upon it.”

In support of finding that services rendered by a beautician are professional in nature, a Texas court stated that “this case is distinguishable from those in which the harm is caused by a breach of a proprietor's duty to a patron/invitee, instead of by a failure to exercise a professional beautician's standard of care.” This was Holmes v. Employers Casualty Company, 699 S.W.2d 339 (1985).

When an individual or a firm has a business that is subject to a professional liability exposure as well as a general liability exposure, questions could arise over just what insurance coverage should respond to a claim by an injured party. Court decisions suggest that each case has to be judged on its own individual merits and facts, with strong reliance not on the title of the person performing the injurious act, but rather on the act itself.

Needless to say, borderline or gray area problems of coverage can be avoided in most cases by the insured's purchasing of professional liability and general liability insurance from the same insurer.