|
 |
Errors and Omissions Insurance 3/7/2009 5:22:29 PM EST Understanding Errors and Omissions Insurance partner, Tressler Soderstrom Maloney & Priess LLP Paul S. White notes in Chapter 38 of the New Appleman Insurance Law Practice Guide, “Understanding Errors and Omissions Insurance,” that the “professional services” covered under a professional liability policy issues to an attorney must in general relate to the practice of law in order for there to be coverage for those services. Where an attorney is acting in her capacity as a law partner and not as an attorney, her actions do not fall within the meaning of “professional services.”
In one case, clients left funds with an attorney to be invested by him in what he designated “the lawyer-client trust fund.” The attorney’s representation as an investment counselor put him in a fiduciary capacity with respect to his clients. Thus, under at least one construction of the policy provisions, there was coverage [Miles v. St. Paul Fire & Marine Ins. Co., 381 So. 2d 13 (Ala. 1980)].
Courts are split on whether a lawyer providing investment advice constitutes providing “professional services.” Some courts hold that such advice is more business oriented rather than legally based and thus does not constitute professional services [see, e.g., Gen. Accident Ins. Co. v. Namesnik, 790 F.2d 1397 (9th Cir. 1986) (noting that “lack of fees directly traceable to the disputed transaction, at a time when fees were billed for legal services, while not dispositive,” is relevant); Smith v. Travelers Indem. Co., 343 F. Supp. 605 (M.D.N.C. 1972)]. Other courts, however, find coverage for such investment advice under a legal malpractice policy [see, e.g., Westport Ins. Corp. v. Bayer, 284 F.3d 489 (3d Cir. 2002; Cont’l Cas. Co. v. Burton, 795 F.2d 1187 (4th Cir. 1986); Jensen v. Snellings, 841 F.2d 600 (5th Cir. 1988)).
Note that a common exclusion in a lawyer’s professional liability policy is for claims arising out of legal services rendered involving the Securities Exchange Act. It is normally referred to as the “SEC exclusion” [see Giles v. St. Paul fire & Marine Ins. Co., 405 F. Supp. 719 (N.D. Ala. 1975)].
Lawyers are frequently called upon to serve as personal representative in probate matters. Many legal malpractice policies exclude a claim arising out of an attorney’s conduct in the course of acting as an administrator, conservator, executor, trustee ― including but not limited to a trustee of charitable or profit sharing trust ― or a fiduciary acting under ERISA. Under the exclusion, when an attorney is acting as a trustee or personal representative, the attorney’s client may not recover damages from the attorney’s legal malpractice insurer for the attorney’s failure to properly discharge the duties he assumed as a trustee [Cohen v. Employers Reinsurance Corp., 117 A.D.2d 435 (N.Y. App. Div. 1986)]. In Cohen, the policy did not cover the attorney’s activities as trustee when, after a proceeding for an equitable accounting, he was surcharged for making imprudent investments. The insuring clause of the policy stated that coverage was being provided to the insured only in his capacity as a lawyer.
Create an account or login to post comments.
|