professional services exclusion

The professional services exclusion is an exclusion commonly endorsed onto general liability policies and found within directors and officers (D&O) liability insurance policies.

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As a modification of commercial general liability (CGL) policies, the exclusion serves to segregate general liability from professional (errors and omissions (E&O)) exposures, leaving only the former insured. (For example, it would not interfere with coverage of a physician's premises liability if someone falls and is injured while in the office, but it would exclude any liability arising from the physician's providing of medical care.) As part of a D&O policy, the intent of the exclusion is similar: to preclude coverage of traditional professional services that are sometimes performed by individuals covered by the D&O policy but should be separately insured. The exclusion would apply in the following situation. Assume that a corporation's chief counsel is an officer of the corporation and therefore covered by the D&O policy. The chief counsel reviews a merger and acquisition agreement with a competitor firm, concluding that the merger does not violate antitrust laws. But 3 months later, the antitrust division of the US Department of Justice challenges the merger, which, after protracted litigation, does not take place. The competitor firm then sues the chief counsel for rendering an erroneous legal opinion that cost the competitor millions of dollars in legal and consulting fees. The professional services exclusion would preclude coverage for the chief counsel in this situation because the services provided were those of a lawyer rather than those of a traditional director or officer. Coverage for this exposure is available under a lawyers professional liability policy or under an employed lawyers professional liability policy.