"Professional Services" Exclusion Applies to Deny Coverage
The Oregon Court of Appeals affirmed the trial court's application of the policy's "professional services" exclusion to deny coverage. State of Oregon v. Haag Home for Boys, Inc., 2024 Ore. App. LEXIS 1674 (Ore. Ct. App. Dec. 4, 2024).
Haag Home for Boys, Inc. (Haag) operated a home for boys under a contract with Oregon Youth Authority (OYA) to provide "behavior rehabilitation services" for boys. Haag's contract with OYA required Haag to maintain a commercial general liability policy, an excess liability policy, and a professional liability policy "covering damages caused by an error, omission or any negligent acts related to the services to be provided" by Haag. The contract required Haag to name OYA as an additional insured on the CGL policy and on the excess liability policy, but not the professional liability policy. Haag purchased all three types of insurance from American Family Home Insurance Company.
The CGL policy had an exclusion stating the insurance did not apply to any "bodily injury" due to the rendering of or failure to render any professional service. The CGL policy listed the State of Oregon as an additional insured. The professional liability policy provided that American would pay "those sums that the insured becomes legally obliged to pay" for injuries resulting from the provision of "professional social or health care services." The professional services liability policy did not list the State of Oregon as an additional insured.
In November 2018, Juan Lopez-Robles was placed in the care of OYA. In January 2020, OYA moved Lopez-Robles to Haag. On March 15, 2020, other residents convinced Lopez-Robles to take what they told him was Oxycotin but was actually Fentanyl. Later that evening, Haag staff checked the apartment but failed to notice that Lopez-Robles was unconscious and bleeding from his nose. During the evening, the apartment was checked twice more by staff, but again failed to notice Lopez-Robles' condition. At 12:32 a.m, another resident noticed his condition and called for help. The staff called 911. Lopez-Robles was transported to a hospital, where he died of Fentanyl toxicity.
The personal representative of the estate of Lopez-Robles initiated a wrongful death action against Haag and OYA. The complaint alleged that Lopez-Robles died as a result of Haag's and OYA's negligence in failing to adhere to "professional standards" for supervising youths in their care. It further alleged that Haag allowed "rampant drug use" in its facility and failed to notice Lopez-Robles' condition the night that he died.
OYA notified American of the complaint and demanded indemnity and assumption of defense under the CGL policy listing the state as an additional insured. When American did not respond, OYA and Haag filed suit against American. The trial court granted American's motion to dismiss. The court's order explained that "the professional services exclusion endorsement found in the CGL poly expressly defines the services provided by Haag as 'professional services' which it then describes as 'Assisted Care Living.'" Therefore, the exclusion barred coverage. The court noted that coverage was potentially available under Haag's professional liability policy, but OYA conceded that it was not listed as an additional insured on that policy.
On appeal, plaintiffs argued that the trial court erred in dismissing their claims on the ground that the exclusion for "professional services" applied to the acts at issue in the wrongful death action. There was no dispute that, unless the exclusion applied, the allegations in the underlying suit would trigger American's obligation to defend under the CGL policy.
Plaintiffs did not contest that most of the allegations fell within the exclusion. Failing to supervise youths in accordance with "professional standards" would seem to clearly to be subject to the exclusion and plaintiffs did to argue the contrary. Plaintiffs instead focused on the single allegation that OYA was negligent in failing to notice that Lopez-Robles needed medical care the night that he died. The policy, however, expressly declared that "professional services" referred to "assisted care living." The controlling question was whether OYA staff, in failing to notice that Lopez-Robles needed medical care, was providing or failing to provide "assisted care living' services.
The court held that "assisted care living" as used in the policy referred to the provision of, or the responsibility for providing, for the safety and well-being of those living at the Haag facility. The allegations of the wrongful death complaint fell squarely within that understanding of the term "assisted care living.'" By neglecting to notice that Lopez-Robles required medical care, Haag staff failed to provide necessary assistance and care to one who lived at Haag's facility.
The case was remanded for entry of judgment declaring the rights of the parties in accordance with the opinion.
