Avoiding Coverage Gaps from Professional Services

Commercial general liability (CGL) policies typically provide coverage for, among other risks, bodily injury, property damage and advertising/personal injury. Many CGL policies exclude coverage for liability stemming from an insured's "professional services." These exclusions are utilized because it is thought that such risks should, in theory, be covered under the insured's professional liability policies. Professional liability insurers, in turn, are careful not to accept coverage for risk they believe should be covered under the insured's CGL policy, so they sometimes exclude coverage for bodily injury and property damage.  

Key Policy Provisions
1.  Definition of professional services. The definitions of "professional services" in a policyholder's CGL and professional liability policies should be coextensive to ensure perfect dovetailing of coverage. If, for example, the definition of "professional services" is narrower in the insuring provisions of the professional liability policy than in the exclusion in the CGL policy, a gap in coverage will likely result. Further, the definition in both policies should make clear the specific types of activities the insurer considers to be "professional services." Disputes frequently arise when a company traditionally regarded as a service provider (like an architecture firm) performs work not traditionally regarded as "professional services" (like construction work under a design-build contract), and is later sued in a claim involving property damage or bodily injury. In the absence of a clear definition of "professional services," the commercial general liability insurer will argue that the work was excluded "professional services" while the professional liability insurer will argue that the work was non-covered bodily injury or property damage, resulting in a gap in coverage for the policyholder.

2.  Nexus wording. Both CGL and professional liability insurers can alter the scope of coverage for a mixed risk by making seemingly imperceptible changes to the policy wording concerning the nexus required between two concepts, and the concepts between which there must be a nexus.