Thursday, May 29, 2008

Critical Coverage Concept -- The Professional Services Definition (5/29/08 Knowledge Knugget)

Unlike GL, where a loss must arise from "your work" -- which is whatever you do, and sometimes restricted to the class codes listed on the dec page, sometimes not -- almost all professional liability policies rely upon a definition of professional services to formulate the boundaries of coverage.

More often than you would imagine, an insured's professional services, and the definition in the policy upon which he is relying for coverage do not match up.

Sometimes the definitions are imbedded in the policy wording, such as for architects and engineers, some insurance agents E&O forms, medical malpractice forms, etc. However, in the world of technology liability and miscellaneous professional, one will most frequently find the definition of professional services provided on the declarations page or by endorsement.

Differences can be subtle, or they can be broad. Take, for example, the incident of an insured who had a medical billing service and also did credentialing services for those medical offices for which she did billing. Her professional liability policy definition of professional services said "medical billing service" and made no mention at all of the credentialing services. If a claim arose from her credentialing service (which is *not* incidental to medical billing -- more about that later), would the carrier have any obligation to defend or pay a claim?

Some would argue that the definition on the dec is only a rating basis, as one finds in GL. But -- and this is a BIG BUT! -- the GL policy does not (unendorsed) refer back to that "class code" to define coverage, and the professional liability policy does! Review this paraphrased typical language, then go check some of your own policies and see what you think:

"We cover the insured for claims arising from Wrongful Acts." Wrongful Acts are then defined as "any act, error or omission in the rendering of or failure to render Professional Serivces." Then Professional Services are defined (I didn't say this would be straightforward) as -- " rendered to others for a fee solely in the conduct of the Insured's profession as stated in Item X of the declarations page."

Think about our medical billing lady. Any credentialing coverage there?

We'll talk about activities that are "incidental to" the defined services next week.

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