Act-Based “Professional Services” in Kentucky Insurance Law: Behavioral-Health Restraints (ESI) Trigger CGL Professional-Services Exclusion

A. Precedents Cited

1. Kentucky rules of insurance interpretation (exclusions, ambiguity, ordinary meaning)

• St. Paul Fire & Marine Ins. Co. v. Powell-Walton-Milward, Inc.: exclusions are narrowly construed and doubts resolved in favor of the insured. The opinion acknowledges this pro-insured lens but still enforces the exclusion once the facts show the act is professional in nature.
• Cincinnati Ins. Co. v. Motorists Mut. Ins. Co.: undefined terms are given their “ordinary meaning.” Because “professional services” was undefined in the CGL part, ordinary-meaning analysis governed.
• Bituminous Cas. Corp. v. Kenway Contracting, Inc.: ambiguous policies are construed against the drafter to effectuate indemnity. The panel’s framework implicitly responds to ambiguity concerns by anchoring “professional” in training, judgment, and regulation rather than job title.

2. Duty to defend vs. duty to indemnify (scope and evidentiary materials)

• Aetna Cas. & Sur. Co. v. Commonwealth: duty to defend is triggered by “any allegation which potentially, possibly or might come within” coverage (broad duty). The district court used this to impose a defense obligation even amid uncertainty.
• KSPED LLC v. Va. Sur. Co.: duty to indemnify exists only if the liability is “actually covered,” and courts may consider “all facts in the record” bearing on coverage. The Sixth Circuit relied heavily on this principle to reject Seven Counties’ “the complaint didn’t plead ESI” position and to consider the OIG report and training evidence.

3. Defining “professional services” under Kentucky insurance law

• Ratliff v. Employers' Liability Assurance Corp.: Kentucky’s foundational case. A nurse’s failure to escort a medicated patient was professional because it required “expert professional ability” and judgment about patient safety. Ratliff also synthesizes out-of-state examples distinguishing acts requiring professional training from “purely mechanical” tasks.
• DiBeneditto v. Medical Protective Co.: Sixth Circuit application of Ratliff. Sexual harassment by a physician was not professional because it bore “no connection” to medical education/training. Critically, DiBeneditto sets the act-focused test: the inquiry is about the nature of the act, not the actor’s title.
• D'Antoni v. Sara Mayo Hosp. and Keepes v. Drs. Convalescent Ctr., Inc.: Ratliff’s contrasted examples. Raising bed rails (D’Antoni) and bathing a child (Keepes) are tasks a layperson can do; they illustrate what “non-professional” looks like.
• Marx v. Hartford Accident & Indem. Co.: supplies influential language: professional acts involve “special learning or attainment” beyond “mere employment or vocation.” The panel, however, refused to treat Marx’s “predominantly mental or intellectual” language as a bright-line rule excluding manual acts.

4. Rejecting status-based definitions and cross-policy definitional borrowing

• Plaza Bottle Shop, Inc. v. Al Torstrick Ins. Agency, Inc.: cited in the discussion of Kentucky’s malpractice statute of limitations definition of “professional services,” historically tied to “law, medicine, and theology or divinity.” The panel used this to show why importing malpractice-limitations definitions into CGL interpretation is misguided.
• Monroe Guar. Ins. Co. v. TEE Eng'g Co.: quoted by Seven Counties for a “status” approach; the panel rejected that approach as inconsistent with Ratliff/DiBeneditto.
• Sutton v. Shelter Mut. Ins. Co.: supports the proposition that terms in different policy parts may have different meanings; the panel used this to reject importing a professional-liability-part definition into the CGL part.
• Mass. Bay Ins. Co. v. Preferred Safety, LLC and Orchard, Hiltz & McCliment, Inc. v. Phoenix Ins.: reinforce act-centered analysis—courts look at the specific act causing injury, not job title.

5. Procedure, waiver, and judicial notice

• Kitchen v. Whitmer: reiterates that arguments not raised below are waived; the panel assumed preservation given Seven Counties’ oblique briefing.
• Dehning v. Globe Life Am. Income Div.: “viewing evidence favorably” does not require ignoring unfavorable evidence; used to criticize Seven Counties’ selective reading.
• Chase Bank USA, N.A. v. City of Cleveland: supports judicial notice of developments in other proceedings; the court took notice of the workers’ indictments but found it did not alter the coverage analysis.

6. Other interpretive and conflict-of-law scaffolding

• Bituminous Cas. Corp. v. J & L Lumber Co. and In re Dow Corning Corp.: frame Erie-style prediction—how Kentucky’s highest court would rule—given sparse Kentucky caselaw on “professional services.”
• Auto-Owners Ins. Co. v. Veterans of Foreign Wars Post 5906: supports the need to define undefined policy terms under Kentucky law.
• Kubala v. Smith and Barton v. Martin: standard summary-judgment principles (de novo review; view evidence favorably to the non-movant).

B. Legal Reasoning

1. The court’s core move: defining “professional services” through an act-based, functional test

Because the CGL part did not define “professional services,” the panel treated Kentucky law as supplying an ordinary-meaning definition shaped by Ratliff and DiBeneditto. The court refined the district court’s multi-factor approach into an “essential factors” framework focused on the act itself:

1. Layperson capability vs. specialized learning: Can the act be performed safely by a layperson, or does it require specialized training/attainment? The panel held licensure/degree is not required; on-the-job specialized training can suffice.
2. Judgment vs. rote mechanics: Does the act require real-time assessment and judgment, or is it routine/mechanical—even if performed in a medical setting? The court refused to equate “manual” with “non-professional.”
3. Regulation of the act: Is the act itself closely regulated (suggesting specialized standards, constraints, and safety concerns)? The court treated Kentucky’s detailed ESI regulatory scheme as strong evidence of professional character.

2. Application to the kneeling-cradle restraint

Applying the factors, the court concluded the restraint was a professional service:

• Specialized learning: Kentucky regulations (e.g., 902 Ky. Admin. Regs. 20:320) require extensive training; the record showed repeated retraining on physical restraints, when to use them, choking risks, de-escalation, and required clinical consultation.
• Judgment: The restraint was a situational, emergent response requiring assessment of an evolving behavioral incident—not a routine caretaking task like feeding or washing.
• Regulation: Kentucky’s “molecular” regulation of ESI—limiting time, manner, purpose (not punishment/retaliation), authorization, and monitoring—demonstrated that safe execution depends on specialized standards.

3. Clarifying what does not drive the analysis

• Pay and job title: The panel disapproved reliance on worker compensation levels (drawn from Md. Cas. Co. v. Crazy Water Co.) as inconsistent with the act-based principle.
• Licensure: The court rejected importing the malpractice statute-of-limitations definition (Ky. Rev. Stat. Ann. § 413.243) into CGL interpretation.
• Cross-part definitions: The court rejected applying a “professional health care services” definition from another policy part to the CGL part, consistent with Sutton v. Shelter Mut. Ins. Co.

4. The “assault not ESI” argument and why it failed

Seven Counties attempted to re-characterize the restraint as assault (or at least as non-ESI) to escape the professional-services exclusion. The panel’s response is important:

• Indemnity looks to the coverage facts, not pleading labels: under KSPED LLC v. Va. Sur. Co., a court may consider all record facts relevant to coverage.
• The dispositive question remained “professional service,” not regulatory compliance: even if the restraint violated ESI regulations or was improperly motivated, the act still drew upon specialized restraint training and judgment.
• No workable line-drawing: the court faulted Seven Counties for not defining assault elements or explaining when the event ceased being a trained restraint technique.

5. Summary judgment posture and record use

The court emphasized that favorable inferences do not permit ignoring contrary evidence (Dehning v. Globe Life Am. Income Div.). It also noted judicial notice of indictments did not change the nature-of-the-act analysis.

C. Impact

1. Practical precedent for Kentucky-governed CGL policies

The decision meaningfully strengthens an insurer’s ability—under Kentucky law as predicted by the Sixth Circuit—to invoke a professional-services exclusion when the injury-producing act: (i) requires specialized training, (ii) demands situational judgment, and/or (iii) is heavily regulated—even if performed by non-licensed staff.

2. Behavioral health and residential child-care settings

The opinion signals that physical restraints in regulated behavioral-health environments are likely to be treated as “professional services” for CGL purposes. Providers relying on CGL coverage for restraint-related incidents may face an indemnity gap unless they procure (or confirm) professional liability coverage that affirmatively covers such incidents.

3. Litigation strategy: pleading vs. record development

For indemnity disputes, the decision reinforces that insurers and insureds will litigate coverage based on the developed record (OIG reports, training materials, regulatory requirements), not merely on the underlying complaint’s terminology (KSPED LLC v. Va. Sur. Co.). This pushes parties to build factual records early—especially around training and regulatory compliance.

4. Limits: the court did not decide “other insurance” primacy

The panel expressly avoided deciding whether the Hanover policy provided primary coverage to Seven Counties. Future cases may still address “available other insurance” questions where written-contract additional-insured requirements are disputed.