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Advertising is Excluded from ‘Professional Services’ in Insurance Coverage Dispute, Second District Decides

As business litigators and class action defense attorneys in Illinois, we recently noted an appellate decision on the subject favorable to the defense. An insurance policy that excludes coverage for “professional services” does not cover damages in a junk fax class action, the Second District Court of Appeal has decided. Westport Insurance Corporation v. Jackson National Life Insurance Company, No. 2-07-1205 (Ill. 2nd Dec. 19, 2008).

Stonecrafters, Inc. is the lead plaintiff in a class-action lawsuit over unsolicited faxes sent by Handleman Insurance Agency, Inc. Handleman sells health insurance policies as an agent for Jackson National Life Insurance Company. Jackson, in turn, has liability insurance from Westport Insurance Corporation. After Stonecrafters settled its suit with Handleman, Handleman assigned its insurance rights to the class, including its insurance from Westport (through Jackson). Westport then filed for a declaratory judgment that these damages are not covered by its contract. The contract covers losses “for damages… arising out of the conduct of the business of the insured agent in rendering services for others as a licensed… health insurance agent.”

Westport argued that the faxes — which advertised group health insurance — did not constitute business activities of an insurance agent. The trial court agreed and granted summary judgment in its favor. Stonecrafters appealed, saying the advertisement was a service to clients and should therefore be covered. The Second District disagreed. It used an analogy to a Texas case, Atlantic Lloyd’s Insurance Co. of Texas v. Susman Godfrey, L.L.P., 982 S.W.2d 472 (Tex. App. 1998), in which the insurer disputed coverage for a law firm that had allegedly defamed a doctor in its advertising. The Texas court found that the letter did not constitute “professional services” as used in the firm’s insurance policy because no legal advice or services were provided.

Similarly, the court wrote, Handleman did not provide any professional services as an insurance broker in its faxes. It pointed out that the professional services of an insurance agent are specialized knowledge of the insurance market and how it applies to the customer. By contrast, the fax was a general advertisement that specifically said actual premiums vary from group to group. “The mere offer to perform a professional service is not a professional service in its own right,” the court wrote, and thus it affirmed the trial court’s summary judgment ruling.

DiTommaso Lubin Austermuehle’s business litigation attorneys handle class action defense for businesses as well as general Illinois contract disputes, including insurance coverage disputes. With offices in Chicago and its outskirts, near Oak Brook, Wheaton and Naperville, Ill., we represent clients in Illinois, Indiana, Wisconsin and throughout the United States. If you need help protecting your legal rights in a business dispute and would like to learn more about our services, please contact us today for a confidential consultation.