(Article from Insurance Law Alert, April 2023)
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Holding
The Ninth Circuit ruled that a professional services exclusion barred coverage for underlying claims and that the insurer was therefore entitled to reimbursement of settlement payments to the policyholder. Mass. Bay Ins. Co. v. Neuropathy Solutions, Inc., 2023 U.S. App. LEXIS 7813 (9th Cir. Apr. 3, 2023).
Background
An underlying suit against Neuropathy alleged that it falsely advertised and recklessly administered non-FDA approved “stem cell” injections, which resulted in severe bodily injuries. The insurer issued a reservation of rights and ultimately settled the underlying suit. Thereafter, the insurer sued Neuropathy, seeking reimbursement of the settlement amount. A California district court ruled that the insurer was obligated to defend and indemnify Neuropathy in the underlying action and was therefore not entitled to reimbursement. The Ninth Circuit reversed.
Decision
The Ninth Circuit ruled that coverage was precluded by a professional services exclusion that applied to bodily injury “caused by the rendering of or failure to render any professional service . . . regardless of whether any such service, advice or instruction is ordinary to any insured’s profession.” The policy further provided that professional services encompass advertising, medical treatment and any health or service advice or instruction. The court concluded that Neuropathy’s liability in the underlying suit stemmed from professional services, since it alleged that the company engaged in deceptive advertising and practices in connection with the provision of medical services.
Comments
In ruling that coverage was barred by the professional services exclusion, the Ninth Circuit deemed it irrelevant that pursuant to a contract with a third party, Neuropathy was only assigned administrative duties, and that the medical professionals who performed the injections were not employed by Neuropathy. The court explained that the professional services exclusion extended to the supervision or monitoring of others who provide professional services.