In Abrams, Fensterman, Fensterman, Eisman, Greenberg, Formato & Eininger, LLP v. Underwriters of Lloyds, London, no. CV11-665, 2013 U.S. Dist. LEXIS 1204 (E.D. N.Y. January 2, 2013), the District Court for the Eastern District of New York upheld a legal liability insurer’s denial of coverage to a law firm. The court agreed with the insurer that although two complaints filed against the law firm and its partners alleged professional malpractice, the policy’s business pursuit exclusion and business enterprise exclusion applied.

Professional Liability Policy and Exclusions at Issue -

Underwriters of Lloyds, London issued a liability policy insuring the firm’s legal liability arising out of any act, error or omission of the insured in rendering or failing to render professional services for others in the insured’s capacity as a lawyer “but solely for acts on behalf of the Named Insured.” The policy was subject to several exclusions, including exclusion IV(F) and IV(G). Exclusion IV(F), a business pursuit exclusion, negated coverage for “any Claim arising out of any insured’s activities as a trustee, partner, officer, director or employee of … [a] corporation, company or business other than the Named Insured.” Exclusion IV(G), the business enterprise exclusion, negated from coverage “any Claim made by or against the insured in connection with any business enterprise … not named in Item 1 of the Declarations, which is owned by an Insured or which is directly or indirectly controlled, operated or managed by any Insured in a non-fiduciary capacity ….” The business enterprise exclusion applied only to interests in which an insured had a specified level of ownership interest.