A recent decision by a California appellate court in Practice Fusion, Inc. v. Freedom Specialty Insurance Company, denying the policyholder more than $118 million in Directors & Officers liability coverage based on an expansive professional services exclusion, is a sobering reminder that this nettlesome exclusion—when over-broadly applied, as was the case here—may render your D&O coverage worthless. The mere fact that Practice Fusion’s insurers asserted this exclusion in the circumstances of this claim should remind brokers and risk managers of the importance of eliminating, or at least narrowing, professional services exclusions where there is any potential argument that the insured is engaged in providing any form of “professional services.” Although it is of course appropriate to fill any gaps created by the exclusion with commensurate Errors & Omissions coverage, E&O policies do not provide the same scope of coverage, or even limits, that are available under D&O policies.
