Opinion ID: 196201
Heading Depth: 2
Heading Rank: 2

Heading: The Professional Services Exclusion

Text: 24 Each policy contains a professional services exclusion, which removes from coverage liability arising out of the rendering or failure to render any professional services by or for you, including ... supervisory, inspection or engineering services. The district court found that this endorsement plainly omits coverage for any inspection service (however 'professional' it might be). GRE Ins. Group v. Metropolitan Boston Housing Part., Inc., No. 93-11727-RGS, slip op. at 6 (D.Mass. Aug. 11, 1994). 25 We disagree. By its own plain terms, the endorsement excludes coverage for a broad category--professional services--and then specifies types of excluded professional services as examples. The examples themselves cannot be broader than the category they exemplify; they are nothing more than subsets of professional services. Thus, only inspections that are professional, as opposed to nonprofessional, fall within the endorsement. See Atlantic Mut. Ins. Co. v. McFadden, 413 Mass. 90, 92, 95, 595 N.E.2d 762, 764, 765 (1992) (employing similar reasoning in finding that lead paint exposure was not within pollution exclusion, which defined pollutant as any contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste, because of additional requirement of discharge, dispersal, release or escape of pollutant). 26 In Roe v. Federal Ins. Co., 412 Mass. 43, 587 N.E.2d 214 (1992), the Supreme Judicial Court applied a formulation for assessing the applicability of a professional services exclusion that we find instructive in the instant case. To be engaged in professional services, 27 [s]omething more than an act flowing from mere employment or vocation is essential. The act or service must be such as exacts the use or application of special learning or attainments of some kind. The term 'professional' ... means something more than mere proficiency in the performance of a task and implies intellectual skill.... 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.... In determining whether a particular act is ... a 'professional service' we must look not to the title or character of the party performing the act, but to the act itself. 28 412 Mass. at 48, 587 N.E.2d at 217 (quoting Marx v. Hartford Acc. & Indem. Co., 183 Neb. 12, 13, 157 N.W.2d 870, 872 (1968) (citations omitted)). The cases collected in Roe all analyze the applicability of professional services exclusions by determining whether the relevant activity was professional in nature. See Harad v. Aetna Cas. & Sur. Co., 839 F.2d 979, 984 (3d Cir.1988) (professional services exclusion applies to attorney's preparation and filing of pleadings); Curtis Ambulance v. Shawnee County Bd. of Comm'rs., 811 F.2d 1371, 1379-84 (10th Cir.1987) (professional services exclusion applies to ambulance personnel's provision of emergency medical services); Bank of California, N.A. v. Opie, 663 F.2d 977, 981-82 (9th Cir.1981) (professional services exclusion applies to mortgage broker's management of loan proceeds). Therefore, we reverse the district court's decision that all inspections were necessarily excluded under this endorsement, and remand for a determination of whether, under Massachusetts law, Metropolitan's inspectors performed professional services. 29 Even if Metropolitan's inspections are found to be professional in nature, however, GRE would still have to defend the underlying lawsuits--at least initially. This is so because, after reviewing the complaints filed against Metropolitan, we find that some of the claims raise legal theories of recovery broader than inadequate inspections. Taken collectively, the claims include negligence, negligent misrepresentation, negligently creating a lead paint risk, failing to require an owner to take corrective action, failing to correct a lead paint hazard, failure to obtain certificates of compliance with the lead paint law, and breach of contract and/or the implied covenant of habitability. 30 At least on their face, these claims are reasonably susceptible of being read to state or adumbrate claims that are beyond the inspection services exclusion. Liberty Mutual, 412 Mass. at 330, 588 N.E.2d at 1347 (quoting Continental Cas., 391 Mass. at 146, 461 N.E.2d at 212). For example, the claimed failure to correct a lead paint risk appears to rest on the theory that the very provision of rent subsidies carried with it the responsibility to make whatever lead paint safety improvements were necessary. Other claims might be based on the theory that the inspections were all perfectly adequate, but Metropolitan's follow up with the landlords was lacking. See Sterilite Corp. v. Continental Cas. Co., 17 Mass.App.Ct. 316, 318, 458 N.E.2d 338, 341 (1983) ([T]he process is one of envisaging what kind of losses may be proved as lying within the range of the allegations of the complaint, and then seeing whether any such loss fits the expectation of protective insurance reasonably generated by the terms of the policy.) (emphasis added); cf. Complaint of Stone Petroleum Corp., 961 F.2d 90, 91-92 (5th Cir.1992) (general liability insurer must defend suits because they contain claims that, liberally construed, are beyond the professional services exclusion). We express no view on whether such expansive theories ultimately will be successful against Metropolitan, and thus GRE. 4 31 Therefore, because certain of the claims are not within the professional services exclusion, GRE is obligated to defend the underlying suits notwithstanding the possibility that certain other claims might be found to be excluded. See Camp Dresser, 30 Mass.App.Ct. at 323, 568 N.E.2d at 634 (imposing a duty to defend despite the fact that many of the complaint allegations fell within the exclusion); see also Aetna Cas. & Surety Co. v. Continental Cas. Co., 413 Mass. 730, 732 n. 1, 604 N.E.2d 30, 32 n. 1 (1992) (noting that the weight of authority places the duty to defend all counts on an insurer which has a duty to defend at least one count of a complaint). As the Camp Dresser court indicated, an insurer in this position may undertake the defense of the underlying action with a reservation of rights with respect to the excludable claims or it may share respective defense responsibilities with co-counsel. 30 Mass.App.Ct. at 323 n. 4, 568 N.E.2d at 634 n. 4.