In July, the First District Court of Appeal published its opinion in Energy Insurance Mutual Ltd. v. Ace American Insurance Co. (2017) 14 Cal.App.5th 281 (EIM), which addressed the question: What does it mean to be a “professional”? Or, specifically, what elevates an otherwise mundane activity to a “professional service,” for the purposes of the “professional services exclusion” contained in most commercial general liability insurance policies?
Prior to EIM, California law was unclear as to whether the term “professional services” should be narrowly interpreted to mean only work that was “predominantly mental or intellectual” in nature. Significantly, the EIM court clarified that the evaluation of whether something is “professional” is not one of brain versus brawn, but rather one of skilled versus unskilled. As the court explained, conduct can qualify as a “professional service” as long as the work requires skill or training. Accordingly, the court rejected the argument that operation of a gas pipeline did not constitute “professional services,” pointing out that the relevant personnel were “required to have specialized knowledge,” and extensive formal or in-the-field instruction.
General liability policies are not intended to replace malpractice or errors and omissions policies, and include “professional services exclusions” in order to limit coverage for certain types of business activities. EIM is a reminder of this principle, and of the exclusion’s potential application where the insured’s liability arises out of his work – regardless of whether the insured is an engineer, a pipeline inspector, or an ear-piercer.