C.A. Says No E & O Coverage for Law Firm Providing Investment Advice

In Cassels, Brock & Blackwell v. LawPRO, the Court of Appeal ruled that a duty to defend was not owed to the plaintiff law firm by its liability insurance carrier, the Lawyers’ Professional Indemnity Company (“LawPRO”).

The policy contained an exclusion with respect to “any CLAIM in any way arising out of an insured providing investment advice and/or services, including without limitation, investment advice and/or services relating to or arising out of a business, commercial or real property investment unless as a direct consequence of the performance of PROFESSIONAL SERVICES.”

The Court interpreted the underlying claim against the law firm to be one in which the firm’s client claimed to have approached Cassels Brock for business advice about the safety of a particular investment. The client’s claim also alleged that the law firm had not properly monitored its trust account and had not followed the client’s instructions in releasing funds from that account.

In the coverage litigation, the law firm argued that it fell within the exception to the exclusion clause, that even if it had provided “investment advice and/or services”, it had done so as a direct consequence of the performance of “professional services”. The firm pointed to the fact that it had used its trust account as a vehicle for the receipt and distribution of investment funds.

But the Court of Appeal did not think that the exception to the exclusion applied. It said that although use of a law firm’s trust account can constitute “professional services”, there was no basis for concluding, in this case, that the account had been used for anything but investment services. Thus, the use that was made of the account did not rise to the level contemplated by the exception to the “investment advice” exclusion.

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