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Vol. 5, Iss. 9
September 7, 2016

This Decision Should Really Trouble Lawyers


There is no shortage of decisions that examine whether the acts of a professional qualify as a “professional service,” either for purposes of determining coverage under a professional liability policy or the applicability of a CGL policy’s professional services exclusion. Often-times these cases involve professions that I know nothing about. So I do not have the benefit of any first-hand knowledge whether the acts qualify as a “professional service.” I can follow the court’s analysis, and decide whether I agree, and think about whether the act “feels” like a professional service, but that’s all I can do.

But Sentinel Insurance Company v. Cogan, No. 15C8612 (N.D. Ill. Aug. 15, 2016) is different. It involves the applicability of a professional services exclusion under a general liability policy issued to a law firm. So here I can put myself in the insured’s shoes. And so can many of you.

At issue in Cogan is coverage for defamation counts in a suit filed by one law firm (McNabola Law Group) against another law firm (Cogan & Power). Some lawyers from the Cogan firm had left the McNabola firm and started a competing firm and litigation ensued.

The particulars of the facts are important so I’ll let the court take over from here: “In August 2014, just before the Cogan Defendants appeared and filed an answer in the underlying suit, Cogan attorney Jon Papin sent an email to the law clerk of a judge before whom McNabola had a pending case. Papin had worked extensively on the case prior to his departure from McNabola. The email alleged serious ethical and professional misconduct by a McNabola attorney. It was sent from Papin’s email account at the Cogan firm and suggested to the law clerk that his suspicions should be shared with the presiding judge. Indeed they were, and the judge relayed the content of the email to the accused McNabola attorney in open court. In September 2014, an attorney for McNabola sent the Cogan Defendants a letter demanding that they ‘immediately cease and desist from publishing false and defamatory statement[s] about [McNabola attorneys], and warning that ‘the McNabola Law Group will take swift action to protect their legal rights.’ As promised, in October 2014, McNabola amended its complaint against the Cogan Defendants to add two defamation claims based on the content of Papin’s email. In support of those claims, they alleged that ‘Papin sent the email accusing [a McNabola attorney] of unethical behavior in his capacity as a partner, representative, employee, and agent of the Cogan Firm, and on behalf of the Cogan Firm . . . with the intention of harming [the McNabola attorney and firm] and benefitting himself and the Cogan Firm.’”

The Cogan firm sought “personal and advertising injury” coverage under its general liability policy issued by Sentinel, which included a professional services exclusion, which applies to any “‘personal and advertising injury’ arising out of the rendering of or failure to render professional services as a lawyer.”

Sentinel argued that it owed no duty to defend the Cogan firm. The competing arguments of the parties – both making sense -- were as follows: “Sentinel argues that the professional services exclusion applies because ‘Papin spoke as a lawyer’ when he communicated his professional opinion to the court regarding pending litigation in which he was previously involved as an attorney. The Cogan Defendants do not dispute this characterization of Papin’s conduct. Indeed, they concede that Papin ‘was acting as an officer of the court consistent with his belief that he had an ethical obligation to point out what he viewed as improper conduct.’ The Cogan Defendants contend, however, that because Papin was not representing a client when he sent the allegedly defamatory email, he was not ‘rendering a professional service’ within the meaning of the exclusion.”

The court noted that “Illinois courts have consistently held that in the context of insurance agreements for lawyers, the term ‘professional services,’ without any modifying language, refers to ‘the practice of law.’” On that basis, the court held that the professional services exclusion did not apply: “Reporting suspected attorney misconduct is a professional duty; it does not ‘involve[ ] service to another.’ It is true that Papin’s email contained information he allegedly obtained while practicing law. It is also true that in conveying his concerns to the court, Papin called upon his specialized knowledge and training as a lawyer. But a service to the profession is not the same as a professional service.”

[Ultimately Sentinel was relived of its duty to defend based on late notice.]

I find Cogan troubling. By concluding that a service to the profession is not the same as a professional service – especially here, where Papin’s email contained information he allegedly obtained while practicing law -- the court is likely preventing coverage for such conduct under a legal malpractice policy. This may have adverse consequences for lawyers because a firm may not have a commercial general liability policy (of course it should). Second, even if it does, the limits of the commercial general liability policy may be less (much less) than those of the legal malpractice policy. After all, the financial consequences for committing legal malpractice can be much greater for a law firm than a client slipping on a banana peel walking up the law firm’s steps.

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