United States District Court, S.D. California
For Craig Isaacs, Nexus Wealth Management, Inc., Plaintiffs: Donald Paul Tremblay, LEAD ATTORNEY, Law Office of Donald P. Tremblay, San Diego, CA.
For Chartis Specialty Insurance Company, Defendant: Jamie Ann Radack, LEAD ATTORNEY, Hayes Scott Bonino Ellingson & McLay, LLP, Redwood Shores, CA; Lawrence M. Guslani, LEAD ATTORNEY, Hayes Scott Bonino Ellingson & McLay, LLP, Redwood City, CA; Stephen A Scott, LEAD ATTORNEY, Hayes Davis Ellingson McLay and Scott, Redwood Shores, CA.
M. James Lorenz, United States District Court Judge.
ORDER GRANTING/DENYING XMSJS [DOCS. 40, 42]
On February 2, 2012, Plaintiffs Craig Isaacs (" Isaacs" ) and Nexus Wealth Management, Inc. (" Nexus') commenced this action against Defendant Chartis Specialty Insurance Company (" Chartis" ). This is an insurance coverage action which arises out of Chartis's alleged failure to fulfill its obligations under a professional liability insurance policy which names Plaintiffs as insured parties. The parties have now filed cross-motions for summary judgment.
The Court found this motion suitable for determination on the papers submitted and without oral argument. (Doc. 50.); See Civ. L.R. 7.1(d.1). For the following reasons, the Court GRANTS/DENIES Defendant's/Plaintiffs' motion for summary judgment.
A. THE INSURANCE POLICY
This case arises from an insurance policy that Chartis issued to Geneos Wealth Management, Inc. (" Geneos" ). This " Securities Broker/Dealer Professional Liability Insurance" Policy (the " Policy" ) was in effect from July 1, 2010 to July 1, 2011. ( Joint Statement of Undisputed Facts [Doc. 42-2] ¶ 1.) Under the policy, Geneos is classified as a " Broker/Dealer" and an " Insured." ( Id. ¶ 2.) Isaacs and Nexus are both classified as " Insured" and " Registered Representative[s]" under the policy. ( Id. ¶ ¶ 3, 4.)
The policy provides, in relevant part, as follows:
B. REGISTERED REPRESENTATIVE PROFESSIONAL LIABILITY INSURANCE
This policy shall pay on behalf of a Registered Representative Loss arising from a Claim first made against the Registered Representative during the Policy Period or the Discovery Period (if applicable) and reported in writing to the Insurer pursuant to the terms of this policy for any actual or alleged Wrongful Act committed by the Registered Representative in the rendering or failure to render Professional Services on behalf of the Broker/Dealer.
In the event a Registered Representative or Registered Representative Company is providing investment advisory services and such services involve a securities transaction that is to be completed through the Registered Representative or Registered Representative Company but not through the Broker/Dealer, coverage shall not be afforded by this policy for such activities unless prior to participating in such activities, the Registered Representative provides written notice to and receives approval from the Broker/Dealer.
In the event a Registered Representative or Registered Representative Company is providing investment advisory services and such services do not involve a securities transaction that is to be completed through the Registered Representative or Registered Representative Company, coverage shall not be afforded by this policy for such activities unless the Registered Representative, prior to such services, provides written notice to the Broker/Dealer.
( Insurance Policy [Doc. 40-5] 37-38.) The policy defines " Wrongful Act" as " any act, error or omission by (1) Broker/Dealer, or by any director, officer, partner or employee thereof in their respective capacities as such, or (2) by any Registered Representative or Registered Representative Company." ( Id. 37.) The policy defines " Professional Services" as follows:
(k) " Professional Services" mean the following services if rendered in connection with an Approved Activity for or on behalf of a customer or client of the Broker/Dealer pursuant to a written agreement between the Broker/Dealer and the customer or client:
(1) purchase or sale of securities, including investment companies,
(2) purchase or sale of annuities or variable annuities,
(3) purchase of [sic] sale of life or accident and health insurance,
(4) providing brokerage services for individual retirement accounts (IRAs), Keogh retirement plans and employee benefit plans (other than multiple employer or multiemployer welfare arrangements),
(5) services performed as a registered investment adviser; and in connection with or incidental to any of the foregoing 5 activities
(6) providing economic advice, financial advice or investment advisory [services], or
(7) providing financial planning advice including without limitation any of the following activities in conjunction therewith: the preparation of a financial plan or personal financial statements, the giving of advice relating to personal risk management, insurance, savings, investments, retirement planning or tax.
( Id. 36.) An " Approved Activity" is defined as follows:
(a) " Approved Activity" means a service or activity performed by the Registered Representative on behalf of the Broker/Dealer which:
(1) has been approved by the Broker/Dealer to be performed by the Registered Representative, and is
(2) in connection with the purchase or sale of a specific security, annuity or insurance product which has been approved by the Broker/Dealer to be transacted through the Registered Representative, and for which
(3) the Registered Representative has obtained all licenses required by the Broker/Dealer or applicable law or regulation.
( Id. 9.) The policy also includes a number of exclusions from coverage, including the following:
The Insurer shall not be liable for Loss in connection with any Claim amde against an Insured:
. . .
(r) with respect to coverage provided under Coverage B only, alleging, arising out of, based upon or attributable to any activity of, or services provided by, the Registered Representative other than a covered Professional ...