A broadly drafted professional services exclusion was at issue in Admiral Ins. Co. v. Ford, 2010 U.S. App. LEXIS 10562 (5th Cir. May 21, 2010). 

   Ford purchased a CGL policy from Admiral.  The policy included an exclusion for designated professional services, stating:

   SCHEDULE

Description of Professional Services:

1.  ALL OPERATIONS OF THE INSURED

.  .  .

With respect to any professional services shown in the Schedule, this insurance does not apply to "bodily injury," "property damage," "personal injury," or "advertising injury" due to the rendering or failure to render any professional service. 

   Ford was hired by Exco Resources, Inc. to create a plan, and then consult and assist in drilling an oil well.  During the drilling, the well had a blowout, and Exco sued Ford.  Exco's complaint alleged Ford breached the contract by failing to prevent the blowout.  The complaint also alleged that "not all operations of Ford were professional in nature." 

   Admiral refused to defend because the underlying conduct required Ford's specialized or technical knowledge, making the professional services exclusion applicable.  Ford sued.  The district court granted Ford's motion for summary judgment, finding that the exclusion was illusory because it defined professional services as "all operations of the insured."  This broad description of professional services negated the entire policy, and gave the exclusion no effect.

   The Fifth Circuit pondered whether Ford could have believed the exclusion excluded all of its operations from coverage.  If so, why would Ford purchase such a policy?  The Fifth Circuit agreed the provision was confusing and a literal interpretation would imply that "all operations" were excluded as professional services.  Nevertheless, Admiral advanced the only reasonable interpretation of the exclusion: that the parties intended the legal definition of professional services to control exclusion of coverage for professional services in any of Ford's operations. 

   Next, the Fifth Circuit considered whether the exclusion negated coverage.  Admiral argued the underlying suit was based only on Ford's failure to use its specialized or technical knowledge in consulting on the drilling of the oil well.  Ford contended that some of Exco's allegations were not based on specialized knowledge, and thus fell outside of the professional services exclusion. 

   The Fifth Circuit found Exco's self-serving allegations that certain acts by Ford to be non-professional were unavailing.  The suit did not assert that Ford incorrectly performed some non-professional activity, but that Ford failed to properly implement a plan to drill a well.  The underlying suit alleged the existence of and failure to fulfill a contract, the very subject of which was Ford's expertise in drilling operations.  Consequently, the Fifth Circuit found there was no duty to defend and reversed.