Form CG 21 35: Exclusion - Professional Services (Various Professions)
1. What the form is
The CG 21 35, titled "Exclusion - Professional Services (Various Professions)," is an endorsement to the standard Commercial General Liability (CGL) policy (e.g., CG 00 01). Its primary purpose is to eliminate coverage for bodily injury, property damage, or personal and advertising injury that arises from the rendering of, or failure to render, professional services. The CGL policy is not intended to cover professional liability exposures, which are typically addressed by separate Professional Liability (Errors & Omissions or E&O) insurance policies. This endorsement clarifies that distinction by specifically excluding claims related to professional advice or services provided by the insured for the professions listed in the endorsement's schedule or in the declarations. It's important to note that this exclusion applies even if the claims allege negligence or other wrongdoing in the supervision, hiring, employment, training, or monitoring of others by the insured, if the underlying cause of the injury or damage involved the rendering or failure to render professional services.
2. Classes of business it applies to
This endorsement is used for a wide array of businesses that provide professional services where a specialized skill, knowledge, or training is exercised. It is not limited to a single industry but rather applies to various professions that are specifically designated in the endorsement schedule. Examples of professions where this exclusion would commonly be applied include, but are not limited to:
- Medical Professionals: Doctors, dentists, nurses, chiropractors, and other healthcare providers. For instance, if a doctor misdiagnoses a condition leading to bodily injury, the CG 21 35 on their CGL policy would exclude coverage for that claim, which should be covered under their medical malpractice insurance.
- Legal Professionals: Lawyers, paralegals, and legal consultants. If an attorney provides incorrect legal advice resulting in financial loss (which could be construed as personal and advertising injury in some contexts, though more typically an economic loss covered by legal malpractice insurance), this endorsement would preclude CGL coverage.
- Accounting Professionals: Accountants, auditors, and tax preparers. A claim arising from an accountant's error on a tax return leading to financial penalties for a client would be excluded.
- Architects and Engineers: Design professionals whose errors in plans or specifications could lead to property damage or bodily injury. For example, if an architect's design flaw causes a structural failure in a building, the resulting property damage claim against the architect would be excluded under their CGL by this endorsement.
- Consultants: Various types of consultants (IT, management, marketing, etc.) who provide specialized advice. If a management consultant's advice leads to a client's financial downturn and a subsequent claim for damages, this exclusion would apply.
- Surveyors: Professionals who provide land surveying services. An error in a property survey leading to a boundary dispute and property damage would fall under this exclusion.
- Insurance Agents and Brokers: While they typically have their own E&O policies, this exclusion might be used on a CGL if they offer other incidental services.
The key is that the endorsement must list the specific professional services to which the exclusion applies. If a business provides a mix of professional and non-professional services, this endorsement helps to delineate the CGL policy's scope.
3. Special considerations
- Necessity of Professional Liability/E&O Coverage: The presence of CG 21 35 underscores the critical need for businesses providing professional services to obtain separate Professional Liability (E&O) insurance. This endorsement creates a significant coverage gap if the insured does not have the appropriate E&O policy.
- Specificity is Key: The endorsement requires the specific professional services being excluded to be clearly described in the schedule or declarations. Ambiguity can lead to coverage disputes.
- Distinguishing Professional Services from General Operations: It can sometimes be challenging to differentiate between a "professional service" and a general operational activity. Generally, professional services involve specialized intellectual skill or judgment, whereas general operations involve manual or routine tasks. For example, a plumber fixing a leaky pipe is generally an operational activity. However, if the plumber also designs a complex plumbing system for a new building, that design work could be considered a professional service.
- "Arising Out Of" Language: The phrase "arising out of" in the exclusion is broad and generally interpreted to mean "originating from," "having its origin in," "growing out of," or "flowing from." This means that if the professional service is a causal factor in the loss, the exclusion is likely to apply, even if it's not the sole or direct cause.
- Relationship to CG 00 01: The CG 21 35 modifies the standard CGL coverage form (CG 00 01). The CG 00 01 provides broad coverage for bodily injury, property damage, and personal and advertising injury, and this endorsement carves out the specific professional services exposures.
- Incidental Professional Services: Some businesses may provide minor professional services that are incidental to their main operations. Underwriters must carefully assess whether these incidental services warrant the attachment of CG 21 35 and if the insured has or needs separate E&O coverage.
- Contractual Requirements: Clients of the insured may require them to carry Professional Liability insurance, especially if they are aware that the CGL policy will likely contain this type of exclusion.
4. Key information for agents and underwriters
- Risk Assessment: Underwriters must thoroughly understand the applicant's operations to identify all professional services being rendered. This involves looking beyond the business's primary classification. For example, a contractor might also offer design-build services, which involve professional architectural or engineering services.
- Pricing Implications: The attachment of CG 21 35 generally reflects the understanding that professional liability is not covered by the CGL and should be insured elsewhere. The CGL premium might be lower than if it were to contemplate professional exposures, but the key is ensuring the insured has the correct corresponding E&O coverage.
- Coverage Gap Identification: Agents have a crucial role in explaining this exclusion to their clients and ensuring they understand the resulting coverage gap if they don't have a separate Professional Liability policy. Failure to do so can lead to E&O claims against the agent.
- Underwriting Guidelines: Insurers will have specific underwriting guidelines regarding which professions or services mandate the use of CG 21 35. Some insurers may have manuscript endorsements or other specific professional liability exclusions (e.g., CG 21 16 for designated professional services, or profession-specific exclusions like CG 22 43 for Engineers, Architects, or Surveyors).
- Claims Handling: When a claim arises, insurers will scrutinize whether the loss stemmed from a professional service as defined or contemplated by the endorsement. Clear documentation of the services provided by the insured is vital.
- Interaction with "Products-Completed Operations Hazard": There can be confusion regarding how this exclusion interacts with the "products-completed operations hazard." While the professional service exclusion aims to remove coverage for the service itself, a defect in a product resulting from a professional service (e.g., a faulty design leading to a defective product) can lead to complex coverage determinations. However, the professional services exclusion generally applies if the injury or damage arises from the service, regardless of when the injury or damage occurs.
In essence, the CG 21 35 is a standard tool used by insurers to maintain the intended scope of the CGL policy by excluding coverage for risks that are better addressed by specialized Professional Liability policies. Its proper application and the insured's understanding of its impact are critical for effective risk management.