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Coverage Matters: Investment Advice
Post on August 1st, 2008

A recent CLE seminar promoted learning the basics of investing, including topics such as stock selection, mutual fund investing, selection of a stock broker, etc., for your firm, yourself, and “your clients.” Lawyers may wish to exercise caution before assuming that any investment advice or assistance they provide to clients is a covered activity under their professional liability policy.

Lawyer’s malpractice insurance generally covers “Professional Services” rendered to others as a lawyer. Before attempting to provide any advice to clients regarding investing decisions or advice, a lawyer should first determine whether or not such advice is covered as professional services rendered as a lawyer. Insurers may well take the position that a claim made arising out of investment advice to a client gone awry is beyond the scope of coverage afforded by the malpractice insurance policy, and deny coverage for such a claim.

For example, the OBLIC policy includes coverage when a lawyer is acting in a fiduciary capacity, such as a trustee or guardian. However, any claim “based solely upon alleged error of the Insured in the exercise of investment judgment” is excluded within this coverage part.