## Facts

- Medical Records Associates, Inc. (MRA) contracted with Massachusetts medical facilities to fulfill their statutory duty to provide copies of patients’ medical records upon request.
- The recipient of the records paid the fee charged for producing the copies.
- MRA held a professional errors and omissions (E&O) policy from American Empire Surplus Lines Insurance Company providing defense and indemnity for claims based on MRA’s “professional activities.”
- A law firm sent MRA a demand letter alleging MRA overcharged and included improper billing items for medical-record copies, asserting violations of Massachusetts consumer-protection and related statutes.
- MRA tendered the demand to American Empire; the insurer declined to defend or indemnify, citing the policy’s coverage limitations and exclusions.
- MRA settled the dispute, then sought reimbursement of defense costs and settlement payments; American Empire again refused.
- MRA sued for breach of contract in federal court; the district court ruled that billing was a ministerial act not covered as a professional service and dismissed the case.
- MRA appealed.

## Issues

1. Whether, under Massachusetts law and the E&O policy’s “professional services” coverage, setting and charging fees for copies of medical records is part of MRA’s professional service.
2. Whether an insurer must defend and indemnify a claim alleging overcharging and improper billing for medical-record copies under a professional E&O policy.

## Decision

- The First Circuit affirmed the dismissal for the insurer.
- The court held that fee-setting and billing for copies of medical records were not “professional services” within the meaning of the E&O policy.
- Overbilling allegations were treated as billing practices—administrative or commercial conduct ancillary to, but not part of, the record-processing service.
- Because the claim did not arise from covered professional services, American Empire had no duty to defend or indemnify.

## Legal Principles

- “Professional services” in an E&O policy generally refers to specialized, skill-based work central to the insured’s professional function, not routine administrative or commercial acts.
- Conduct that is a “ministerial act” or “routine aftereffect” of a covered service—such as invoicing, pricing, or billing—does not become a covered professional service merely because it relates to professional work.
- Coverage analysis focuses on the nature of the alleged wrongful act (here, billing/fee-setting), not solely on the professional context in which the insured operates.

## Conclusion

The court concluded that an E&O policy covering a medical-records processor’s professional services did not extend to claims based on overcharging and improper billing for record copies, so the insurer owed no defense or indemnity for the settled demand.


Med. Recs. Assocs., Inc. v. Am. Empire Surplus Lines Ins. Co., 142 F.3d 512 (1st Cir. 1998)