From the PLUS Journal article “Risky Business: Coverage Denied to Attorney Simultaneously Practicing Law & Real Estate Brokerage” (July 2012) by Joel T Shackelford.

Oftentimes, attorneys practicing in real estate, whether in real estate transactions or litigation, become intimately involved in the real property dealings of their clients. It is common for these attorneys to draft offer letters, or purchase and sale agreements, and/or communicate directly with brokers, agents, buyers, sellers, and financial institutions in order to consummate a successful real estate deal, or resolve a litigated real estate matter. It is reasonably held and believed amongst attorneys that the regular and customary practice of law permits an attorney to engage in the aforementioned acts on behalf of their clients. However, a question arises as to where the line is drawn regarding the practice of law as opposed to actions governed by a state’s Department of Real Estate requiring licensure from that Department. In the insurance market, this question is especially important as matters generally covered as “Professional Services” under Lawyers Professional Liability (“LPL”) policies may not be covered when an attorney is deemed a “broker” in a transaction and not an “attorney.” The decision in the case of Lancia v. State Nat’l Ins. Co. 2012 WL108846, which came down on April 9, 2012, is illustrative of this issue.

In Lancia, an attorney who owned a real estate brokerage company was sued for causes of action sounding in fraud and negligence with respect to said attorney’s involvement in providing settlement and/or “closing services” with respect to a certain real estate transaction of the attorney’s client. In the plaintiff’s complaint against his former attorney, the plaintiff alleged that the attorney provided “legal services” to him as to the transaction (drafting necessary transactional documents), as well as certain “broker services” (activities as to financing the transaction). Based on the “legal service” allegations, the attorney defendant sought coverage for the action through his LPL policy based on that policy’s duty to defend clause. The court rejected the attorney-defendant’s argument for coverage, however, and interpreted the complaint to be “devoid of any allegations” not predicated on the attorney’s role as a “broker” in the subject transaction. According to the Lancia court, the attorney-defendant’s role as an “attorney” in the matter “arose from, and was intertwined with” his role as a “broker” such that the attorney-defendant’s LPL policy did not provide a duty to defend.

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