Last month, the United States District Court for the Southern District of Florida dismissed with prejudice a declaratory judgment action filed by a purported third-party beneficiary against an errors-and-omissions insurer based on application of a professional-services exclusion. See Speckin Forensics, LLC, v. Twin City Fire Ins. Co., No. 9:25-cv-80383-AMC (S.D. Fla. Aug. 8, 2025).
Speckin, an international forensics firm, was hired to perform DNA analysis in a lawsuit and subcontracted the work out to a third-party subcontractor (Twin City’s insured). The insured-subcontractor subsequently admitted evidence was contaminated and its resulting analysis was unreliable. Speckin settled a third-party claim against it by one of the defendants in the lawsuit who contested the DNA results. Speckin then sued the insured-subcontractor for negligence and breach of contract arising out of the faulty analysis and obtained a default judgment.
Speckin, as a purported third-party beneficiary under the Twin City policy, initiated a declaratory judgment action against Twin City demanding the amount of the default judgment. The Twin City policy afforded coverage for “‘personal and advertising injury’ caused by an offense arising out of [the insured-subcontractor’s] business.” The policy excluded coverage for any “‘personal and advertising injury’ arising out of the rendering of or failure to render any professional service.”
Speckin alleged the insured-contractor was entitled to coverage because it misrepresented in written reports and statements that its analysis was reliable and “disparaged the quality and value of Speckin’s reputation and goodwill” based on its association with the insured-subcontractor. Speckin alleged Twin City breached the policy by denying coverage for the default judgment. Twin City moved to dismiss the lawsuit, in part, because the professional-services exclusion barred coverage. Although Speckin conceded the performance of DNA analysis constituted a professional service, as defined in the policy, it contended its allegations were based on alleged misrepresentations (defamatory statements), not the professional services rendered (DNA analysis).
The court agreed with Twin City. Applying Nevada law, the court deemed the professional-services exclusion “enforceable and unambiguous.” It acknowledged the breadth of the “arising under” language in the exclusion. But the court concluded “a broad exclusion does not alone amount to an illusory one” and supplied multiple examples of coverage still afforded under the policy (e.g., coverage for false advertising or general injuries at the insured-subcontractor’s lab). The court rejected Speckin’s attempt to avoid the exclusion by characterizing its injury as arising out of misrepresentations because, while the insured-subcontractor’s alleged misrepresentation “may have increased the scope of the harm, … it does not alter where the harm arose from—[the] faulty DNA analysis.”
Analysis of professional-services exclusions is fact intensive. In addition, the analysis often is complicated by potentially overlapping coverage issues under general liability and errors-and-omissions policies. The Insurance Coverage Group at LGWM is experienced in navigating these coverage issues and is available to address questions regarding professional services exclusions and the impact on coverage under general liability and errors-and-omissions policies.