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Truck Insurance Exchange v. Pacificare Health Systems3/30/2005
l causal connection or incidental relationship. (Acceptance Ins. Co. v. Syufy Enterprises (1999) 69 Cal.App.4th 321, 328.) The professional services contemplated by a professional liability insurance clause generally involve specialized knowledge and skill that is predominantly mental or intellectual--rather than manual--labor. (Tradewinds Escrow, Inc. v. Truck Ins. Exchange (2002) 97 Cal.App.4th 704, 713 [escrow agent provides "professional services"].) A professional service generally "signifies an activity done for remuneration as distinguished from a mere pastime." (Hollingsworth v. Commercial Union Ins. Co. (1989) 208 Cal.App.3d 800, 807 [ear piercing performed at a cosmetics store is a "professional service"].) Coverage for "professional services" is determined based on, among other things, the nature of the insured's enterprise. (Id. at p. 806.)
A reasonable insured could understand respondents' professional liability clause to cover the allegations in the underlying lawsuits. The clause covers the failure to render professional "health care services," a term that is not defined and is very broad. In PacifiCare's case, failure to render health care services could reasonably mean loss or detriment to subscribers and providers occasioned by a business practice of limiting or denying health care services or refusing to pay for medical treatment that was rendered.
Respondents insist that their professional liability coverage strictly means coverage for medical malpractice. Yet respondents issued their policies knowing that PacifiCare neither runs any hospitals nor directly provides medical treatment to its subscribers. What PacifiCare offers to its subscribers is the promise of "quality health care"--rendered by doctors and hospitals under contract with PacifiCare. Given the nature of PacifiCare's enterprise, it was reasonably foreseeable to the insurers that PacifiCare could be sued by its subscribers (and their doctors) for misrepresenting the quality of the professional services it provided, for failing to provide adequate or appropriate health care services to subscribers, or for failing to reimburse doctors for medical services rendered. PacifiCare was sued because it did not provide the type of professional service it promised to subscribers and providers.
PacifiCare points out that the professional liability clause of the policy--apart from covering the failure to render health care services--also expressly covers "activities of any person as a member of a board or a committee of the insured . . . ." This coverage supports PacifiCare's contention that the policy is intended to cover more than just bodily injury. Respondents maintain that this coverage only applies to emotional distress caused by PacifiCare's board or committee members. Respondents' reading is frankly absurd. No reasonable interpretation of a professional liability clause covering corporate board member misconduct would limit exposure to bodily or mental injuries.
Where there is ambiguity in a policy, it is germane to know how an insurer believes its insured understands the policy at the time it is issued. (AIU Ins. Co. v. Superior Court, supra, 51 Cal.3d at p. 822; Bank of the West v. Superior Court (1992) 2 Cal.4th 1254, 1264-1265.) This is particularly true where the insurer's agent gave the insured a particular understanding of the policy when it issued. (Shade Foods, Inc. v. Innovative Products Sales & Marketing, Inc. (2000) 78 Cal.App.4th 847, 874.) Here, Truck's agent assured PacifiCare that the CHPL policy covered a broad spectrum of risks, including PacifiCare's business practices in providing health care insurance and management services. Years later, Truck attempted to redirect Pa
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