I have been talking about this issue for a long time: the challenges that insurers have faced in determining whether injury or damage was caused by a “professional service.”  The issue usually arises in determining whether the insuring agreement, of a professional liability policy, has been satisfied, as well as whether a “professional services” exclusion, in a commercial general liability policy, is applicable. 

The number of disputes and amount of case law addressing this issue is remarkable.  By my count, in 2020 alone, there were at least 20 decisions that addressed whether conduct as issue, for purposes of determining coverage, involved the performance of a “professional service.”

Insurers have it in their hands to correct this situation – or at least make a good effort – but many don’t, despite all of the evidence that they should.  Instead, they continue with disputes and coverage litigation over the meaning of “professional services.” 

Late last month an Oklahoma federal court addressed this issue.  The insurer lost.  There is no doubt in my mind that the policy at issue was not intended to cover the claim.  But the commercial general liability policy did not define the term “professional services” in an exclusion.  And that was the insurer’s self-inflicted undoing.

Here is my last bark on the issue.  The question in Am. Nat’l Prop. & Cas. Co. v. Select Management Group, No. 20-542 (N.D. Okla. Mar. 23, 2021) was coverage for a real estate broker, Michelle Bradshaw and related corporate entities, for a claim for bodily injury sustained by another real estate broker, Kathleen Barnes. 

Bradshaw was the listing agent for a home in Broken Arrow, Oklahoma.  Barnes was showing the home to clients.  While in the backyard, a dog – whose presence was not disclosed in the listing information – came from the side of the house and began to approach.  Barnes ran toward the back door, tripped and broke her arm.

Bares sued Bradshaw and certain related entities (collectively “Bradshaw” here).  Bradshaw sough coverage under a commercial general liability policy.  The insurer, Am. Nat’l Prop. & Cas. Co., filed an action seeking a determination that it owed no obligations on account of the CGL policy’s “Professional Services” exclusion. 

The “Professional Services” exclusion did not define the term “professional services.” It simply included a non-exhaustive list of services that are “professional services.”  With the wee-bit possible exception of legal, nothing on the list of examples of “professional services” even came close to what a real estate agent does, unless real estate agents perform gall bladder surgery, dispense drugs, sell eye glasses or remove hair.  The list of “professional services,” with no relevance to what a real estate broker does, goes on.

American National’s argument was summed up by the court this way:

“[E]ven though real estate services are not among the enumerated examples, it is nevertheless a ‘professional service’ within the meaning of the exclusion because a real estate agent ‘likely has a specialized skill and knowledge regarding what disclosures she needs to make’ when listing a property. Accordingly, because Ms. Barnes’s injuries resulted from Ms. Bradshaw’s alleged failure to warn of the dog when listing the property, American National says its policy does not cover Ms. Barnes’s claims.”

The Court disagreed.  It turned to a common definition of “professional services” used by courts around the country:

“The act or service must be such as exacts the use or application of special learning or attainments of some kin[d]. The term ‘professional’ in the context used in the policy provision means something more than mere proficiency in the performance of a task and implies intellectual skill as contrasted with that used in an occupation for production or sale of commodities. A ‘professional’ act or service is one arising out of a vocation, calling, occupation, or employment involving specialized knowledge, labor, or skill, and the labor or skill involved is predominantly mental or intellectual, rather than physical or manual.”

The court explained it decision as follows:

“Here, the omission in question—Ms. Bradshaw’s alleged failure to warn of the dog when listing the house—occurred while Ms. Bradshaw was acting in her capacity as a real estate agent, but the allegedly negligent act had nothing to do with the ‘specialized knowledge’ that might make the sale of real estate a ‘professional service.’ To the extent real estate agents have special knowledge about what information must be disclosed in a listing, that expertise would seem to concern information that buyers need in order to make an informed, legally binding offer.”

I can see the argument that, when putting together a real estate listing, the professional aspect, regarding which information to include, has to do with what the buyer needs to know to make an informed buying decision. 

But, at the same time, I believe that the court got it wrong and some courts would have come out the other way, concluding that putting together a real estate listing, without regard to the particular information, is a “professional service.”  Now, is there an obligation to include, on the listing, the fact that there is a dog at the home?  That’s a liability/duty issue for the plaintiff to prove.

There is no doubt in my mind that the insurer did not intend to cover this claim under a CGL policy.

Of course, this could have been avoided, or at least the insurer could have had a better chance of prevailing, if it had defined “professional services” in the exclusion, and done so in a manner that was tied to the insured’s profession as a real estate broker.