If an attorney gets duped into executing a check and distributing its proceeds as part of an elaborate fraudulent check scheme – an act which will then of course inevitably get him sued – is he covered for that act under his professional liability coverage? A Massachusetts Superior Court judge has astutely, and on the correct reasoning, found that the answer is no. As I have discussed in other posts, Massachusetts law is clear that professional liability coverages are subject to what is in effect an extracontractual limitation on coverage, namely a requirement that the loss arise out of the unique specialty of the type of professional covered by the policy, and not out of routine practices that, one, did not require that specialized expertise and, two, could have occurred in any type of business. Judges and courts sometimes get fooled by this, and don’t recognize that this limitation exists because it is not expressly stated in the insuring agreement of professional liability policies. However, rationally, that restriction is clearly inherent in the simple statement in professional liability insuring agreements that claims arising out of the insured’s professional services are what is covered; the absence of this restriction would transform a professional services policy into an extraordinarily broad general liability policy covering practically anything and everything that happens in a professional services business.
The trial judge in this case didn’t get that wrong, granting summary judgment to the insurer, and finding, in part, that:
Massachusetts courts have interpreted a professional act to be ‘one arising out of a vocation, calling, occupation, or employment involving specialized knowledge, labor, or skill, and the labor or skill involved is predominately mental or intellectual, rather than physical or manual. …’ … When deciding whether an act is ‘professional’ in nature, the court has ‘look[ed] not to the title or character of the party performing the act, but to the act itself.’ … Therefore, tasks a professional performs are not covered by professional liability insurance if they are ‘"ordinary" activities "achievable by those lacking the relevant professional training and expertise."’ …
Although there is no appellate decision dealing with the precise factual situation involved with this case, there are decisions to assist the court in understanding the nature of professional legal services and its boundaries. . .
With the guidance of these cases, this court finds that Wolsky’s actions that amounted to the receipt, endorsement, and deposit of a check, and the distribution of funds did not require a lawyer’s specialized knowledge, labor, or skill, i.e., they were not professional services. … Wolsky was merely an essential pawn in an elaborate fraudulent check scheme, a role which did not call upon his professional skills but rather required Wolsky’s blind trust to act as a facilitator to convert a check to cash.
The case is Fleet National Bank v. Wolsky v. American Guaranty & Liability Insurance Company (Civil Action No. 04-CV-5075), and you can find more on it, including a source to order the entire opinion, here.