In Am. Nat’l Property & Cas. Co. v. Select Mgmt. Group, 20-cv-542 (N.D. Okla. Mar 23, 2021), the Northern District of Oklahoma recently examined the meaning of “professional services” when evaluating the policy’s professional services exclusion. These terms were not defined in the policy itself. The underlying suit involved a real estate broker, the listing agent, who was showing a home to another broker. While in the backyard, a dog, whose presence was not disclosed to the visiting broker, came from the side yard. The visiting agent ran toward the backyard, subsequently tripping, falling and breaking her arm.

The visiting agent sued the listing agent, along with related corporate entities, for her injuries. When faced with deciding coverage, the listing agent’s insurer brought declaratory action, in an effort to refuse coverage based on the policy’s “professional services” exclusion.

In its analysis, the court had to consider the nature of the profession and whether or not “real estate agents” fall within the scope of professional services. The insurer argued that a real estate agent “likely has a specialized skill and knowledge regarding what disclosures she needs to make” when it comes to listing or showing a property. Further, because the injury resulted from an alleged breach or failure to disclose important information, the policy does not cover the claims.

The court found the insurer’s argument to be unconvincing for two reasons. First, there is a lack of evidence regarding the specialized knowledge of a real estate agent, specifically with disclosures that must be made when showing a home. Second, the nature of the insured’s job is not outcome determinative when applying the exclusion.

Due to the lack of guidance on the issue, the court turned to other jurisdictions for direction. The court believed that this alleged “breach” had nothing to do with a real estate agent’s specialized knowledge. Rather, the failure to warn of the dog’s presence was more akin to garden variety negligence. When defining a real estate agent’s specialized knowledge, their expertise would seem to deal more with the information a buyer must have in order to make a legally binding offer.

In reaching this conclusion, the court considered instances when a real estate agent failed to disclose certain information. For instance, in Southern-Owners Insurance Co. v. Herrera,116 F.Supp.3d 1310 (M.D. Fla. 2015), the insured, who was a real estate agent, failed to disclose to a buyer that a home was built on a dumping bit. Because of the type of disclosure, as it affected one’s decision to purchase a specific home, the homebuyer’s claims were excluded. The present case is distinguishable because the negligent act had nothing to do with selling the home. The agent’s failure to address the dog’s presence was a judgment call, not a duty based on the specialized knowledge of an agent.

Ultimately, the court found the insurer failed to meet its burden by proving the insured’s claims fell within the exclusion. Moving forward, courts will likely continue to examine the fundamental duties and expertise of a specific professional. Once these scopes are more clearly defined, the issue of specialized knowledge will likely become explicit and policies may begin to incorporate such details.

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