Allstate Insurance v. Interbank Financial Services

The primary issue presented by this appeal is whether an insurance company has a duty to defend or indemnify an insured under a business liability policy in an action between the insured and its client for securities fraud. We hold the insurance company has no such duty and affirm the judgment.

Background

The Third Party Complaints

In November 1986 plaintiff Allstate Insurance Company issued a business liability insurance policy to defendant Interbank Financial Services. On the insurance application form, Interbank listed the nature of its business as “Life Insurance Sales & Service.” Policy limits were $1 million, and the annual premium was $317.

In January 1987 Interbank and defendant John Naslund, an officer and director of Interbank, tendered the defense of 10 state court actions to Allstate. The complaints alleged that Interbank “acted as a broker-dealer, investment advisor and insurance advisor” with respect to “the offering for sale and selling ... of securities in the form of ‘tax shelter’ and ‘conservative income producing’ investments involving thoroughbred racehorses,” and that beginning in 1980 Interbank conspired with numerous other defendants to…