On 26 February 2016, the Full Federal Court of Australia delivered its judgment in Chubb Insurance Company of Australia Limited v Robinson  FCAFC 17.
Reed Building Group Pty Limited (RBG) held a D&O policy with Chubb Insurance Company of Australia Limited (Chubb) which provided cover to RBG and its subsidiaries against any loss occasioned by an act or omission on the part of their directors and certain other officers. The policy contained an exclusion clause for any act or omission committed “in the rendering of, or actual or alleged failure to render any professional services to a third party”. The term “professional services” was not defined in the policy.
In 2010, Reed Constructions Australia Pty Limited (Reed Constructions), a company within the RBG group of companies, entered into a contract with 470 St Kilda Road Pty Limited (St Kilda) to design and construct certain buildings in Melbourne. Under the contract, Reed Constructions was required to verify its progress claims by one of its officers or employees swearing a statutory declaration in support of those claims. In December 2011, Reed Constructions issued a progress claim which was supported by a statutory declaration made by its Chief Operations Officer (COO). Later, when Reed Constructions was placed into liquidation, St Kilda took a view that the company was not entitled to the payments sought in the progress claim because subcontractors and materials suppliers had not been paid in full. St Kilda commenced proceedings against the COO seeking damages and alleging that when he made his statutory declaration he did not make all reasonable enquiries to verify the truth of the matters or did not have reasonable grounds for asserting that all charges, costs and expenses claimed were properly due and payable to Reed Constructions.
The COO claimed indemnity from Chubb in respect of any liability which he may be found to have to St Kilda. Chubb denied indemnity to the COO alleging that any liability would be excluded from cover because his conduct would fall within the professional services exclusion clause in the policy. This issue became the subject of contested litigation.
Decision of the trial judge
The trial judge held that the exclusion clause did not apply as the provision of a statutory declaration was not an act in the rendering of professional services within the meaning of the exclusion clause (although it was an act carried out in the rendering of services). In this regard, her Honour disagreed with Chubb’s argument that the provision of the statutory declaration was part of project management services which were a profession. The trial judge held that, whilst, in some circumstances, project management may be seen as a profession, it could not be generally accepted that project management fell within an established professional discipline. In any event, the trial judge thought that even if project management did comprise professional services, an act of providing a statutory declaration was not of this kind. It was an act in the provision of information as a prerequisite to a payment under the contract, which is an administrative activity rather than a professional one.
Decision of the Full Federal Court
On appeal, the Full Federal Court agreed with the trial judge that the exclusion clause did not apply and dismissed the appeal. In reaching this conclusion, the Court looked at each of the components of the expression “in the rendering of professional services to a third party” in the exclusion clause. Most significantly, the Court considered the interpretation of the term “professional services”. At the outset, the court observed that the term “professional” in the insuring clause of a professional indemnity policy does not necessarily bear an identical meaning in an exclusion clause of a public liability, product liability or D&O policy. In the court’s view, the expression “professional services” in the exclusion clause meant services of a professional nature furnished by RBG or its subsidiaries involving the application of skill and judgment being services which fall within the scope of a vocational discipline which is generally regarded as a profession. Agreeing with the trial judge, the Court found that project management was not generally regarded as a profession in 2010 and 2011.
Further (and in contrast to the trial judge) the Court held that the making of the statutory declaration did not constitute the rendering of any service to St Kilda. Rather, this was an act done in the proper discharge of the contractual obligations owed by Reed Construction to St Kilda in respect of claims for payment made under the contract. This act amounted to nothing more than the routine compilation of factual material in order to secure a contractual payment. The Court agreed with the trial judge that the obvious purpose of the exclusion was to exclude activities that are truly professional in nature, such as architectural design, engineering, surveying and quantity surveying and was not intended to apply to routine activities of Reed Constructions or of its executives.
The Court expressly recognised that courts may interpret “professional” differently between insuring and exclusion clauses. Why that is the case was not explained. If insurers needed reminding, this judgment again demonstrates that courts will favour an interpretation benefiting an insured, whether or not resort is available to the contra proferentem principle.