The recent decision in Chubb Insurance Company of Australia Limited v Robinson highlights the differing approaches courts have taken to interpreting the term ‘professional services’ in insurance contracts.
Reed Constructions Australia Pty Ltd entered into a design and construction contract for the redevelopment of a site and the construction of 173 residential apartments and a number of office suites. Pursuant to the agreement, Reed was required to provide statutory declarations by an officer in support of any progress payments made. The purpose of the statutory declarations was to detail and verify the amounts Reed had paid to subcontractors, and for materials, in the works completed to date. The chief operating officer of Reed, Mr Robinson, completed a number of such statutory declarations on the company’s behalf.
Reed was placed into liquidation and subsequently the building owner alleged that Reed had claimed progress payments to which it was not lawfully entitled. The owner issued proceedings against Mr Robinson on the basis of misleading and deceptive conduct and negligence.
Mr Robinson denied liability and by a cross-claim sought indemnity from Reed’s directors’ and officers’ insurer Chubb. Chubb sought to rely on the professional services exclusion in the policy as the basis for denying indemnity. Chubb argued that by giving the statutory declarations, Mr Robinson was performing ‘professional services’ which were excluded under the policy.
On appeal, the Full Court of the Federal Court decided that Chubb could not rely on the ‘professional services’ clause to deny indemnity. The Court considered that Chubb had not established either that project management was a profession or that the routine managerial task of making statutory declarations was a professional service.
The Court noted that the term ‘professional’ in the insuring clause of a professional indemnity policy does not necessarily hold an identical meaning if the expression were to be used in public liability, product liability or directors’ and officers’ policies. Significantly, the decision highlights that courts will interpret ‘professional services’ narrowly in exclusion clauses and find that the clause does not apply.
In contrast, courts are more willing to interpret the term broadly and inclusively in the insuring clause of a professional indemnity policy. For example in the earlier decision of Suncorp Metway Insurance Ltd v Landridge Pty Ltd. That case involved a real estate agent undertaking administrative duties. However, the Court concluded that because the administrative tasks were undertaken in the course of carrying out property management, it was to be considered a professional activity for the purposes of the policy. The Court recognised that property management was a core aspect of the business of a real estate agency and, accordingly, was a professional duty for the purposes of the policy.
|The meaning of ‘professional services’ has always been problematic in the insurance context. Generally speaking that term will be construed narrowly or widely depending on whether it is used in an exclusion or in an operating clause.|