R i s k Ma n a g e m e n t | c o n s t r u c t i o n i n d u s t r y
Are You a Professional?
E x p a n d i n g the Definition of Professional Liability
by Bob Lembke, CPCU, ARM
S i l v e r L i n k | F a l l 2 0 1 2
S i l v e r s t o n e g r o u p. c o m In years past, professional liability insurance seemed to be
needed only by those in the medical, legal, architectural or
engineering fields. It has become evident, however, that this
is no longer the case. Recent court rulings have demonstrated
that an individual’s vocation no longer determines whether or
not they are considered a “professional.”
Construction industry professionals have a long history of
purchasing professional liability insurance. This is particularly
true for companies that have licensed engineers on staff
and/or engage architects and engineers to design work that
they construct under design-build contracts, as well as firms
providing construction management services. All have been
determined to provide professional services which cannot
be properly insured under a typical general liability (GL) policy.
However, the scope of professional risk is widening and nearly
anyone can be the target of a professional liability claim, even
those employed in the “trades.”
Case In Point
A recent case involved a termite inspection company (Yasuda
Fire & Marine v. Heights Enterprises). The claim against the
termite company was for alleged defective workmanship in
spraying for termites at a condo project. The GL insurer for the
termite company denied the claim on the basis that the policy
contained a professional services exclusion. The wording of
the exclusion stated that the policy did not apply to bodily
injury or property damage due to “the rendering or failure
to render professional services.” The court agreed with the
insurer, explaining that the termite company held a license
to perform services and it should be considered a professional
service provider.1
It is unknown how many state courts use licensing as a
criterion for determining if an individual is a professional
based solely on that fact that they hold a license to perform
services, but it seems clear that many courts use this as an
important consideration.
In another recent case, a home inspection company was hired
by individuals purchasing a house. The homeowners later sued
the inspection company, alleging that the inspector failed to
find certain undisclosed defects. The inspection company’s
insurer denied the claim on the basis that the policy contained
a professional services exclusion endorsement. In this case,
the court did not consider whether or not the company was
licensed to perform the services, but stated the professional
services endorsement “fit the situation” because it was titled,
“Exclusion – Inspection, Appraisal and Survey Company.” The
court held for the insurer.2
SilverStone Group recommends a
detailed discussion about Professional
Liability insurance with an agent
or broker, especially if a professional
services exclusion exists on your
GL policy and/or you are licensed
and/or regulated to perform any
part of your services.
S i l v e r L i n k | f a l l 2 0 1 2
Cases similar to these two examples are growing in numbers,
which is why this topic deserves immediate attention.
More Confusion
The majority of GL policies do not contain a professional
services exclusion. When the GL form itself does not contain
an exclusion, the professional services exclusion is added
by endorsement – but are all GL policies endorsed to add
a professional liability exclusion? No – and that’s another
point of confusion. Some insurers view certain operations/
disciplines as professional in nature, while classifying others as
nonprofessional without any clear reason for doing so. Therefore,
while one insurer will add the restrictive endorsement, another
insurer may not. Even when an insurer views an insured’s
operation as a professional service, it may not choose to impose
a professional services exclusion.
In a perfect world, the insurance industry would address this
topic in a consistent manner. As it stands, it is difficult to
predict whether someone might be viewed as a professional
as opposed to a nonprofessional by both the courts and the
insurance companies.
What Should You Do?
SilverStone Group recommends a detailed discussion about
Professional Liability insurance with an agent or broker,
especially if a professional services exclusion exists on
your GL policy and/or you are licensed and/or regulated
to perform any part of your services. It is imperative to
S i l v e r s t o n e g r o u p. c o m determine whether or not you could be viewed as providing
a professional service, and that you understand in detail what
coverages are and are not in your GL policy. Even if you do not
have a restrictive endorsement, there still may be a need
for a professional liability policy to be certain you have full
coverage for professional activities. A GL policy only provides
personal injury, bodily injury and property damage coverages,
while your operations may expose you to non-performance and/
or rectification claims (where you could be required to go back
and correct/fix improper work). GL policies may not properly
address these exposures.
Better Safe Than Sorry
Given recent court proceedings, you could be considered to be
performing a professional service if you are licensed to provide
that service and a GL policy may not provide adequate protection.
You may be a “professional” in the eyes of the courts and/or
insurance companies for a number of reasons. Do not overlook
this exposure; have a detailed discussion with your insurance
agent/broker before you find yourself on the wrong side of a
professional liability claim.
1,2
alecki, Donald. “Beware: Expanding Definition of Professional Services.” The Rough Notes
M
Company, Inc. April, 2012. Accessed on July 31, 2012 at http://roughnotes.com/rnmagazine/2012/
april2012/2012_04p026.htm
Contact Bob Lembke | blembke@ssgi.com