Despite Allegation that Law Firm Was Not Providing “Legal Advice,” Complaint Triggers Duty to Defend Under Lawyers’ Professional Liability Policy

Wiley Rein LLP

A California federal court has held that a complaint alleging that a law firm was providing services in a non-legal capacity nonetheless triggered a duty to defend the firm under a lawyers’ professional liability policy, where the complaint also described legal-related services provided by the insured. Associated Indus. Ins. Co. v. Bloom, 2020 WL 5802949 (C.D. Cal. July 29, 2020).

An actress alleged that she was sexually assaulted by a film producer. The producer hired a law firm to provide “reputation management” services; the firm subsequently made several statements on the producer’s behalf purportedly to denigrate the credibility of the actress. The actress brought suit against the law firm for, among other things, intentional infliction of emotional distress and conversion of intellectual property. In the complaint, the actress alleged that the law firm was not acting “to provide legal advice,” but rather as a “fixer.” The law firm’s professional liability carrier denied coverage on the ground that the complaint was not brought for a covered professional service. In addition, the carrier took the position that an exclusion precluding coverage for any alleged “harassment” applied.

In the ensuing coverage litigation, the court denied the insurer’s motion for summary judgment and held that the insurer had a duty to defend against the underlying complaint. The court first held that despite the complaint’s characterization of the law firm’s work as being outside the scope of legal services, the complaint nonetheless described activities by the law firm that in fact related to legal services, such as supervising a factual investigation of the actress’s allegations and negotiating with a newspaper concerning an allegedly defamatory article. The court therefore held that the complaint potentially asserted liability arising out of a covered professional service.

In addition, the court held that the complaint alleged conduct that potentially fell outside the harassment exclusion. Although the complaint alleged that the law firm repeatedly caused emotional distress to the actress, the complaint also made other allegations, such as that the law firm stole intellectual property from the actress, that may not involve “harassment.”

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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