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Is the Loss Covered By General or Professional Liability Insurance? How About Neither?

A computer consultant is upgrading servers at a client’s site. While explaining a problem to one of the client’s employees, he gestures with one hand and knocks over a hot cup of coffee. The drink spills on the employee, causing a serious burn. The consultant reports the incident to his insurance agent, who submits a claim to the company providing his commercial general liability insurance. However, the company responds by denying coverage, citing a change attached to the policy. This change removes coverage for bodily injury arising out of the rendering of computer consulting services, advice or instruction by the policyholder. According to the company, the employee’s injury resulted from the computer consulting services.

The consultant’s policy contains this provision because losses “arising out of the rendering of computer consulting services” are more properly insured under a professional liability policy. The provision’s intent is to exclude coverage for losses resulting from errors in his professional judgment. However, its wording seems to support the insurance company’s contention that there is no coverage. The consultant argues that spilling a cup of coffee is something that could happen to anyone, not just someone providing professional services. What is the correct interpretation?

A commercial general liability policy insures the policyholder for bodily injury, property damage, and personal and advertising injury, caused by an occurrence taking place during the policy period, and for which the policyholder is liable. The policy takes this broad starting point and limits coverage with several provisions (called “exclusions”) that describe types of occurrences to which the insurance does not apply. The insurance company added a special exclusion to this policy so that it would not cover errors and omissions the consultant makes while acting in his professional capacity.

Unfortunately, if the consultant has purchased a professional liability policy, it may exclude coverage for losses involving bodily injury or property damage. Insurance companies write this provision into the policies in the belief that the CGL policy will cover these losses. The result is that the consultant may have no coverage under either policy for this incident. The company providing the CGL policy denies coverage because he was acting as a consultant at the time; the other company does not cover loss from injuries.

To reduce the chances of a situation like this occurring, professionals such as physicians, architects and engineers, and consultants should work closely with an insurance agent. The agent should explain any special changes to the CGL policy that eliminate coverage, such as professional liability exclusions. She will also review and explain the provisions of a professional liability policy. The consultant should ask how the two policies coordinate with each other, especially with regard to injury and property damage losses. The agent should have experience with the companies’ claim paying practices. She may know that a particular company is likely to deny injury claims under the CGL policy because of a professional liability exclusion.

The best way to avoid an uninsured loss like this is for the businessperson to become informed about exactly what he is buying with his insurance premium dollars. As an informed buyer, he can insist that the policies meet his needs. If a particular insurer cannot or will not do that, he has plenty of competitors to choose from. Liability insurance can be a significant business expense; the last thing any business wants is a surprise gap in coverage at claim time.