The Nebraska Supreme Court, applying Nebraska law, held that professional services exclusions in three interrelated policies did not apply to the acts of law enforcement. Gage Cty. v. Emp’rs Mut. Cas. Co., 937 N.W.2d 863 (Jan. 31, 2020).
In 1985, six people were arrested and charged with the murder of a woman in Beatrice, Nebraska. Each of the arrestees–who came to be known as the “Beatrice Six”–were sentenced to ten or more years in prison. In 2008, the Beatrice Six were exonerated by DNA evidence. In 2009, the Beatrice Six filed federal civil rights actions against Gage County, the county sheriff, and several deputies involved in their prosecution, alleging claims for malicious prosecution, false arrest, conspiracy, and having policies, practices, and customs that deprived the Beatrice Six of their civil rights. The insured county tendered the suit for a defense to an insurer pursuant to three insurance policies: an occurrence-based commercial general liability (CGL) policy, a claims-made “linebacker” E&O policy, and an occurrence-based umbrella policy. The insurer denied coverage under all three policies. With respect to the claims-made linebacker policy, the insurer denied coverage on the ground that no claims were brought during the policy period. With respect to the CGL and umbrella policies, the insurer stated that the professional services exclusions in each applied to bar coverage for acts of law enforcement. A jury found in favor of the Beatrice Six and awarded them over $28 million in damages.
In 2017, the insured county filed a complaint for declaratory judgment against the insurer. The district court held that the CGL policy’s professional services exclusion barred coverage under that policy, and that there was no coverage under either the linebacker or umbrella policies. The insured county appealed directly to the Nebraska Supreme Court.
The insurer argued that the definition of “professional services,” following Marx v. Hartford Accident & Indemnity Co., 157 N.W.2d 870 (Neb. 1968), included the conduct of law enforcement. The insured county argued for the application of the definition of “profession” from cases construing the Nebraska statute of limitations governing professional negligence, under which law enforcement would not qualify as a profession.
The Nebraska Supreme Court held that when the three policies were analyzed as a whole, an ordinary and reasonable person would understand the professional services exclusion to be inapplicable to the acts of law enforcement. All three policies had professional services or professional liability exclusions, although only the linebacker and umbrella policies defined “professional services.” The linebacker policy expressly defined “professional services” to mean services performed in connection with an exclusive list of professions, such as medicine, law, or accounting, among others. The umbrella policy provided a similar, non-exhaustive list of professions. Law enforcement did not appear within the definition of “professional services” in either policy, but instead appeared in a list of occupations under the occupation liability exclusion in the umbrella policy. The court found that the policies’ language indicates that the parties understood (i) professions and occupations to have separate meanings, and (ii) law enforcement to be an “occupation” rather than a “profession.” Because the court based its analysis on the definitions of “professional services” appearing in the policies, it rejected the parties’ contentions based on judicial constructions regarding the scope of “professional services” taken from case law.