Insured’s Investment Advisory Activities Not Covered Under Insurance Agents E&O Policy

Applying Michigan law, a federal district court has held that an insured’s investment advisory activities did not qualify as “conduct of the insured’s business . . . in rendering or failing to render professional services” because the insuring agreement went on to enumerate specific covered professional services that did not include investment advisory activities.  Salvati Ins. Grp. v. Utica Mut. Ins. Co., 2014 WL 4248433 (E.D. Mich. Aug. 27, 2014).

The insured provided investment advice to a customer.  As a result of that advice, the customer allegedly lost nearly $300,000 in high-risk investments.  The insured sought coverage for the ensuing suit brought by the customer under its life insurance agents E&O policy.  The insurer declined to defend or indemnify the insurer on the grounds that the underlying suit did not trigger any insuring agreement.

In the coverage litigation that followed, the court granted summary judgment to the insurer, holding that the advisory activities did not fall within the relevant insuring agreement.  The insuring agreement provided specified coverage for wrongful acts committed in the “conduct of the insured’s business . . . in rendering or failing to render professional services” as an insurance agent, an insurance consultant, or a notary public.  The insured argued that the phrase “conduct of the insured’s business” was broad enough to encompass any activity that generated revenue for the insured.  The court rejected this argument, because the phrase “conduct of the insured’s business” was “immediately followed by a specific listing of the . . . business activities that the Policy covers,” and the actions described in the underlying complaint did not even “arguably” fall within any of the covered business activities.