Business Enterprise Exclusions Bars Outside Entity Conduct

An Illinois federal court, applying Illinois law, has held that a lawyers professional liability policy's business enterprise exclusions barred coverage where most of the conduct giving rise to the claim was alleged to have occurred while the insured attorney was serving as a director, shareholder, and officer of an outside entity. Wesco Ins. Co. v. Zanayed, 2023 WL 1862959 (N.D. Ill. Feb. 9, 2023).

The insured attorney and his nephew were officers of a residential real estate management company. Disgruntled with the business relationship, the attorney filed suit against his nephew alleging conversion and a conspiracy. The nephew counterclaimed and also filed an arbitration demand alleging conversion in the form of sham consulting fees, inflated commissions, legal fees, and accounting fees, while also asserting legal malpractice, fraud, and unjust enrichment (among other claims). The arbitration settled, and the insured tendered a claim under a lawyers