Background
Plaintiffs Queen, Mayer, and Grand Hook Agency sought a declaratory judgment that Berkley Assurance owed coverage for costs incurred defending against claims by their former employer, Sherbrooke Corporate. Sherbrooke alleged the plaintiffs engaged in self-dealing, misappropriated funds, and used company resources to establish a competing entity. The district court dismissed the complaint, ruling that such conduct did not fall within the definition of professional services under the insurance policy.
The court’s reasoning
The Eleventh Circuit reviewed the dismissal de novo. The court noted that while the plaintiffs argued the policy covered the operation of their agency, the allegations centered on competition and fiduciary breaches. Citing Georgia law, the court explained that professional services require conduct that exacts the use of special learning or attainments. The court found that the allegations of breaching fiduciary duties and creating a competitor did not assert liability for professional services rendered on behalf of the agency.
What it means going forward
The ruling clarifies that insurance policies covering professional services do not extend to conduct involving the creation of competing businesses or breaches of fiduciary duty, even if the insured holds a professional title.