Business Pursuits Exclusion of a Professional Liability Policy Found To Preclude Coverage for the Insured Law Firm and Its Attorney
By Ekaterina Levy, Sedgwick San Francisco
An Illinois appellate court held that a lawyers professional liability policy’s business pursuits exclusion barred coverage for an underlying civil conspiracy action against a law firm and one of its attorneys. American Zurich Ins. Co. v. Wilcox & Christopoulos, LLC, 2013 Ill. App. LEXIS 23 (Jan. 17, 2013). The underlying suit alleged that the attorney, through the services of his own company, prepared fraudulent documents in order to obtain a liquor license for a restaurant. The court found that the exclusion was not rendered ambiguous solely because the attorney acted “for” two companies (his own and the restaurant) in procuring the liquor license.
An investor filed a civil conspiracy lawsuit against the Wilcox law firm, attorney Wilcox, and other defendants, alleging that the defendants were involved in a conspiracy to open and operate a restaurant by illegal means. The company that was to operate the restaurant, Panacea Partners, allegedly retained attorney Wilcox and his company, Liquor License Solutions, to obtain the liquor license. The complaint alleged that Liquor License Solutions was involved in the fraudulent scheme, Wilcox prepared false corporate documents, and Wilcox acted both individually and in the scope of his employment with Liquor License Solutions.
The Wilcox firm requested coverage for the lawsuit from American Zurich pursuant to a lawyers professional responsibility claims-made policy. At issue before the appellate court was whether a “business pursuits” exclusion operated to preclude coverage. Specifically, the exclusion provided that the policy did not afford coverage for “any claim based upon or arising out of in whole or in part, from the alleged acts or omissions by any Insured, with or without compensation, for any business enterprise, whether for profit or not-for-profit, in which any Insured has a controlling interest.”
The court rejected the insured’s argument that the exclusion applies only when an insured attorney does work for an entity in which any insured has a controlling interest, whereas the underlying complaint alleged that Wilcox’s work was done for Panacea Partners and not for Liquor License Solutions. Relying on the dictionary definition, the court found that the term “for” is unambiguous, and in the context of the entirety of the exclusion the term meant “for the benefit of.” Because Wilcox, an insured, acted for the benefit of his company, Liquor License Solutions, while working to obtain a liquor license for Panacea Partners, the court held that the business pursuits exclusion was triggered, and American Zurich had no duty to defend attorney Wilcox or the Wilcox law firm.
Under this decision, the business pursuits exclusion will bar coverage as long as an insured’s work benefitted its own company, even if the insured simultaneously performed legal work for a third party.