Last week, we wrote about the Illinois Supreme Court’s decision late last year, holding that insurance coverage for malicious prosecution was triggered when the insureds’ wrongful conduct occurred rather than when the underlying claimant was exonerated. Earlier this year, the Nebraska Supreme Court also addressed a coverage dispute arising out of a wrongful conviction claim, holding a professional services exclusion did not apply. Gage County v. Employers Mutual Cas. Co., 304 Neb. 926 — N.W.2d —- (2020). The court’s decision was based on the specific language of several insurance policies issued by the insurer to the policyholder (not just the CGL policy that it was interpreting), which the court concluded reflected the parties’ understanding that “professional services” did not include “law enforcement,” rather than an independent evaluation as to whether “law enforcement” is or is not a “professional service.”
Gage County arose out of a murder that occurred in 1985 in Beatrice, Nebraska and the resulting investigation conducted by the Gage County Sheriff, Jerry DeWitt, and five deputy sheriffs, including Burdette Searcey and Wayne Price, who was also a psychologist. The County Attorney charged six people (“the Beatrice Six”) with crimes arising out of the murder, five of whom pled and one of whom was convicted. Nearly two decades later, the Beatrice Six were exonerated by DNA evidence, received pardons and filed civil rights lawsuits against Gage County, the Gage County sheriff’s office, the Gage County Attorney’s office and the Gage County sheriff, deputy sheriffs and county attorney responsible for investigating and charging the Beatrice Six. After a trial, the jury concluded that “Searcey and Price had manufactured evidence or engaged in a reckless investigation,” found “Gage County liable through DeWitt’s policy or custom of allowing violations of civil rights,” and entered judgment in favor of the plaintiffs for more than $28 million in damages.
Employers Mutual Casualty Company issued three insurance policies to Gage County in effect when the Beatrice Six were investigated and charged: (1) a commercial general liability insurance policy, (2) a claims-made “linebacker” policy covering errors or omissions in the discharge of organizational duties and (3) an umbrella policy. Each policy covered “personal injury,” which was defined to include “false arrest, detention or imprisonment” and “malicious prosecution,” and included a professional services exclusion. The CGL policy’s exclusion applied to “personal injury… due to the rendering [of] or failure to render any professional services” and did not define “professional services.” The linebacker policy also excluded “professional services, which it defined to include a list of enumerated professions that included the practice of medicine, law, accounting, architects, engineers, surveyors and draftsmen, and did not include the profession of “law enforcement.” The umbrella policy included an exclusion applying to liability arising out of “professional services” or “excluded occupations liability” with an exception to the extent there was professional or excluded occupations liability coverage provided by a CGL policy. The umbrella policy included a definition of “professional services” with a non-exhaustive list that did not include law enforcement and defined “excluded occupations liability” to include five types of services, one of which was “Law Enforcement.”
EMC disclaimed based on the professional services exclusion in the CGL policy, and Gage County filed a declaratory judgment action, alleging EMC wrongfully refused to defend, owed coverage up to the $2,000,000 aggregate limit of the CGL policy and may also owe additional coverage under the linebacker and umbrella policies. The trial court granted EMC’s motion for summary judgment and denied Gage County’s motion for partial summary judgment, holding that the professional services exclusion barred coverage. Gage County appealed, the Nebraska Supreme Court granted a petition to bypass the Nebraska Court of Appeals, and the sole issue before the Nebraska Supreme Court was whether the professional services exclusion applied.
The court held that the professional services exclusion did not apply. EMC asserted that law enforcement is a “profession” based on the court’s construction of the meaning of “professional services” in a professional liability insurance policy in Marx v. Hartford Acc. & Ind. Co., 157 N.W.2d 870 (Neb. 1968), and Gage County relied on the definition of “profession” in the Nebraska professional negligence statute, § 25-222, but the court found the parties’ argument as to whether law enforcement was a “profession” or a “professional service” did not guide its analysis. Rather, the court based its conclusion on the language of all three policies issued by EMC to Gage County, which it found to clarify the intent of the parties with respect to the dispositive issue. Specifically, the court relied on the language of the linebacker and umbrella policies, which did not identify “law enforcement” as a “professional service,” and found the fact that umbrella policy issued by EMC identified “law enforcement as an occupation rather than a profession is a particularly compelling indication of the parties’ understanding” that “law enforcement” was not a “professional service” for the purpose of the exclusion. For this reason, the court held that the professional services exclusion in the CGL policy did not apply. The court also reversed the trial court’s holding that the professional exclusion applied to Mr. Price’s acts as a psychologist based on its determination that all claims were based on his work as a sheriff’s deputy, not as a psychologist. Based on the foregoing, the court reversed the trial court’s conclusions that the professional exclusion barred coverage and remanded for further proceedings.