(Article from Insurance Law Alert, September 2016)
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An Illinois federal district court ruled that a professional services exclusion did not apply to an attorney’s law-related conduct because he was not rendering legal services. However, the court nonetheless held that there is no coverage based on the policyholder’s untimely notice. Sentinel Ins. Co., Ltd. v. Cogan, 2016 WL 4270213 (N.D. Ill. Aug. 15, 2016).
The Cogan law firm was sued for defamation by another law firm. The defamation claims were based on an email a Cogan attorney sent to a judge’s law clerk alleging ethical and professional misconduct by an attorney at the plaintiff law firm. The Cogan law firm sought coverage from Sentinel under a general liability policy. Sentinel sued, seeking a ruling that it had no duty to defend or indemnify based on a professional services exclusion and untimely notice. The court rejected the first basis for denial, but upheld the latter.
The professional services exclusion applied to “any ‘personal and advertising injury’ arising out of the rendering of or failure to render professional services as a lawyer.” The court ruled that the Cogan attorney was not rendering professional legal services when he sent the email. The court explained that although the attorney was acting as an officer of the court when he reported the alleged misconduct and “spoke as a lawyer,” he was not rendering a professional service because he was not representing a client in connection with the email. The court stated 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.”
With respect to Sentinel’s late notice defense, the court held that the law firm forfeited coverage by waiting approximately eight months to provide notice of the underlying suit. Illinois law requires consideration of several factors relating to the timing of the notice, including the policyholder’s sophistication, diligence, and awareness of events triggering notice. Citing to the law firm’s legal expertise, its awareness of the events triggering notice, and its lack of diligence with respect to coverage analysis, the court found the delay in notice untimely as a matter of law.
The Cogan law firm filed a notice of appeal in the Seventh Circuit this month. We will keep you posted on any updates in this matter.