The Ontario Superior Court of Justice recently upheld the
Lawyers Professional Indemnity Co.'s ("LawPRO")
denial of coverage for a practicing lawyer because the claims
against the lawyer in question arose from investment advice he had
given prior to providing professional advice.1 The court
looked at "extrinsic evidence", that it was permitted to
consider by the terms of the Policy itself, and agreed with LawPRO
that the lawyer's investment advice was not a "direct
consequence" of any prior professional services. Accordingly,
the Investment Advice Exclusion set out below applied and coverage
was properly denied and there was no duty to defend the
This decision is yet another reminder to lawyers that they
should be extremely wary of providing any advice or services to
their clients that could be construed as "investment advice
In late 2007, the insured lawyer, Mr. Juroviesky was informed by
a friend, that he was looking for investment capital for a business
for which he was principal (the "CVW investment"). Mr.
Juroviesky then emailed Mr. Bell, a former client, about the
potential investment (the "November email"). This
communication had no relation to the prior retainer that Mr. Bell
had with Mr. Juroviesky.
The November email to Bell included a series of thoughts about
the viability of the CVW investment, its strengths and weaknesses
and a number of short and long term suggestions that Juroviesky
recommended that Bell should take as a "white knight"
investor. Juroviesky also advised in the email that the
recommendations were subject to further due diligence. Ultimately,
Bell decided to invest in CVW and retained Juroviesky in connection
with the investment.
The business failed and shut its doors in 2009. Bell then
commenced an action against Juroviesky in 2010 alleging damages as
a result of his advice and services in relation to the investment.
Mr. Juroviesky reported the complaint to LawPRO. LawPRO denied
coverage relying on an "Investment Advice Exclusion"
which was as follows:
the Policy does not apply:
(d) to any CLAIM in any way related to or
arising out of an INSURED providing investment advice and/or
services relating to or arising out of a business, commercial or
real property investment, unless as a direct consequence of
the performance of PROFESSIONAL SERVICES" [Emphasis
LawPRO submitted that because the investment advice in this case
came before any legal services provided by the insured, this
exclusion applied. Mr. Juroviesky's position was that he
provided professional services to Bell as defined in the Policy,
and that even if there was a mix of legal and investment
advice/services, Bell's claims regarding negligent provision of
legal services should still be covered. He also submitted that the
investment advice was a direct consequence of performing
professional services. Accordingly, the exception to the Investment
Advice Exclusion should apply.
The Court reviewed the well established principles governing a
duty to defend and interpretation of insurance policies. It found
that although there were aspects of the claim which appeared to
deal with investment advice, the claim was to be generously
construed with the result that the claim was sufficient to give
rise "to the possibility of coverage."
Once it was found that the claim fell within coverage, the onus
shifted to LawPRO to show that an exclusion clause precluded
coverage. LawPRO had to demonstrate that the exclusion 'clearly
and unambiguously' excluded coverage. The LawPRO policy had a
"notwithstanding" clause that expressly permitted LawPRO
to deny a defence if it determined on reasonable grounds that the
claim was excluded. Under this clause, the parties may adduce
evidence to be considered by the court in addition to the statement
The court found that all of the allegations of breach
"related to" investment advice given by Mr. Juroviesky
about the CVW investment. It looked at the November email, which
was permitted "extrinsic evidence" and agreed with LawPRO
that Mr. Juroviesky's investment advice was not a direct
consequence of any prior professional services. Accordingly, the
Investment Advice Exclusion applied.
Mr. Juroviesky's claim that coverage should only be excluded
for the claims surrounding the investment advice, but not the legal
services, was also rejected for two reasons. The initial grant of
coverage in the Policy did not provide coverage for investment
advice in the first place so no exclusion was needed to exclude
only that advice. On its plain words the Investment Advice
Exclusion excluded claims "in any way related to or arising
out of investment advice."
1 Juroviesky and Ricci LLP v. Lawyers Professional
Indemnity Co., 2014 CarswellOnt 46 (S.C.J.)
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