Illinois Court Holds Fee Dispute Does Not Involve Professional Services

Wiley Rein LLP

An Illinois appellate court has held that an underlying action involving a fee dispute was not a claim involving professional services and was not covered under a professional liability policy. RLI Ins. Co. v. Acclaim Res. Partners, LLC, 2020 WL 5548318 (Ill. App. Ct. Sept. 16, 2020). The court further held that the underlying action’s conclusory allegations of “professional negligence” did not trigger coverage because the allegations were unsupported by the alleged facts.

The insured company entered into a subrogation services agreement with a client. The client then sued the company, alleging that the company shorted the client in the remittance of its money when the company endorsed, cashed, and deposited subrogation settlement checks. The client further alleged that the company was negligent and failed to exercise reasonable care in its bookkeeping. The company’s professional liability insurer denied coverage for the suit and filed a declaratory judgment action against the company. The trial court held that the insurer did not have a duty to defend because the underlying action was not a claim involving “Professional Services.”

In the ensuing appeal, the company argued that the underlying action alleged negligence in the rendering of “Professional Services,” which included “investigating and evaluating claims” and “negotiating settlement of claims.” The insurer argued that the underlying action alleged negligence in relation to the payment of fees owed, not the rendering of “Professional Services.” The insurer further argued that the company failed to identify any factual allegations concerning errors or omissions by the insured while investigating, evaluating, or settling claims.

The appellate court agreed with the insurer, concluding that the alleged facts all pertained to the company’s handling and remittance of fees, which did not constitute a “Professional Service,” and which took place after the company investigated, evaluated, or settled claims. The court also concluded that, although the underlying action might have included claims that were described as “professional negligence,” such conclusory allegations did not create a duty to defend. The court thus held that the underlying action did not involve negligence in the rendering of “Professional Services,” and the insurer had no duty to defend under the policy.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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