Publications

(Article from Insurance Law Alert, July/August 2020)

For more information, please visit the Insurance Law Alert Resource Center.

A Kentucky federal district court ruled that a professional services exclusion barred coverage for a suit alleging that a laboratory reported false test results and that the insurer had no duty to defend or indemnify the underlying claims.  State Farm Fire and Casualty Co. v. Compliance Advantage, LLC, 2020 WL 3800517 (E.D. Ky. July 7, 2020).

The underlying suit alleged that the laboratory reported false results to government agencies that led to the plaintiff’s loss of child custody.  State Farm sought a declaration that it had no duty to defend or indemnify the suit based on a professional services exclusion, which applied to injury or damage “arising out of the rendering or failure to render any professional service or treatment,” including but not limited to “treatment, advice or instruction of any medical, surgical, dental, x-ray or nursing services.”  The court concluded that the underlying claims, based on the laboratory’s taking of samples and transmission of results to third-parties, fell squarely within the exclusion.  The court rejected the laboratory’s counter-assertion that the loss resulted from equipment malfunction or other “ministerial conduct” rather than the provision of professional services.  The court explained that Kentucky law interprets “arising out of” expansively to mean “originating from,” “growing out of” or “flowing from,” such that “all that is required is some causal connection.”