Capitol Indemnity Corp. v. St. Paul Fire & Marine Ins. Co.

Decision Date29 December 1972
Docket NumberNo. 68-C-162.,68-C-162.
PartiesCAPITOL INDEMNITY CORPORATION, a Wisconsin corporation, individually and as Assignee of Joseph M. Roblee, Plaintiff, v. ST. PAUL FIRE AND MARINE INSURANCE COMPANY, a Minnesota corporation, Defendant.
CourtU.S. District Court — Western District of Wisconsin

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Bruce Gillman, of Arthur, Tomlinson & Gillman, Madison, Wis., for plaintiff.

Phillip E. Crump, of Borgelt, Powell, Peterson & Frauen, Milwaukee, Wis., for defendant.

OPINION AND ORDER

JAMES E. DOYLE, District Judge.

This is a civil action to recover on an amended money judgment rendered by the Circuit Court of Waukesha, Wisconsin, against the defendant's named insured and to recover expenses for attorney's fees allegedly incurred as a result of defendant's refusal to defend said action. Plaintiff's motion to amend the complaint and for summary judgment with respect to all three counts of the complaint is presently before this court.

I find that there is no genuine issue with respect to the facts which appear hereinafter under the heading of "Facts."

FACTS

Plaintiff, Capitol Indemnity Corporation (hereinafter referred to as "Capitol") is an insurance corporation organized under the laws of Wisconsin with its principal place of business in Wisconsin. Defendant, St. Paul Fire and Marine Insurance Company (hereinafter referred to as "S.P.I.") is an insurance corporation organized under the laws of Minnesota with its principal place of business in Minnesota.

Prior to August 27, 1963, Joseph M. Roblee was a certified public accountant practising as a sole proprietor under the name of Joseph M. Roblee and Company. Prior to August 27, 1963, Roblee prepared financial statements and audit reports which were subsequently found by the Circuit Court of Waukesha, Wisconsin, to be false and misleading.

On or about August 27, 1963, Roblee entered into a partnership with Earl D. Johnson for the practice of accounting, which partnership was known as Roblee-Johnson & Company. Said partnership had its principal office in Minnesota with two branch offices in Minnesota and two branch offices in Wisconsin. The written partnership agreement contained no express provision whether the partnership was assuming liabilities incurred by either Roblee or Johnson prior to its formation.

On or about December 15, 1963, defendant St. Paul Fire and Marine Insurance Company issued a three-year accountants' professional liability policy in the amount of $100,000 to the named insured, Roblee-Johnson and Company. This policy provided in part:

INSURING AGREEMENTS
I. ACCOUNTANTS' PROFESSIONAL LIABILITY. To pay on behalf of the Insured all sums which the Insured shall become legally obligated to pay for damages on account of professional services rendered or which should have been rendered by the Insured, their predecessors in business, or any other person for whose acts the Insured is legally liable in the performance of professional services for others in the Insured's professional capacity as accountants. (This Insuring Agreement includes as a part of the professional services of an accountant such legal liability arising from any claim or claims which may be brought about or contributed to by reason of: dishonesty, misrepresentation or fraud; services performed or advice given in relation to matters of taxation; breach of contract; civil libel, slander or defamation of character; committed or alleged to have been committed by the Insured in the ordinary course of their business as accountants.)
II. INVESTIGATION, DEFENSE, SETTLEMENT. As respects the insurance afforded by the other terms of this policy, the Company shall:
(A) defend any suit against the Insured alleging damages, even if such suit is groundless, false or fraudulent; but the Company may make such investigation, negotiation and settlement of any claim or suit as the Company deems expedient;
(B) pay all premiums on bonds to release attachments for an amount not in excess of the applicable limit of liability of this policy, all premiums on appeal bonds required in any such defended suit, but without any obligation to apply for or furnish any such bonds;
(C) pay all expenses incurred by the Company, all costs taxed against the Insured in any such suit and all interest accruing after entry of judgment until the Company has paid, tendered or deposited in court such part of such judgment as does not exceed the limit of the Company's liability thereon;
(D) reimburse the Insured for all reasonable expenses incurred at the Company's request other than loss of earnings or loss and expense due to loss of time incurred by the Insured or by any employee of the Insured.
The Company agrees to pay the amounts incurred under this Insuring Agreement, except settlements of claims and suits, in addition the applicable limit of liability of this policy.
III. DEFINITION OF INSURED. The unqualified word "Insured" includes the named Insured and also any partner thereof while acting within the scope of his duties as such and the heirs, executors, administrators and assigns of each such Insured, in their capacity as such. Each employee of the named Insured shall be an additional Insured under this policy while acting within the scope of his duties as such. Any change among the partners of the named Insured, even though it results in changes in the name or business style of the named Insured, shall not affect the liability of this insurance, but such changes shall be reported to the Company promptly and in no event later than the next anniversary date of the policy.
* * * * * *
CONDITIONS
A. NOTICE OF OCCURRENCE. Upon knowledge of any occurrence which may result in a claim, the Insured shall give written notice thereof to the Company or any of its authorized agents as soon as practicable. Such notice shall contain particulars sufficient to identify the Insured and also reasonably obtain information respecting the time, place and circumstances of the occurrence.
B. NOTICE OF CLAIM OR SUIT. If claim is made or suit is brought against the Insured, the Insured shall immediately forward to the Company every demand, notice, summons or other process received by him or his representative.
* * * * * *
D. ACTION AGAINST COMPANY. No action shall lie against the Company unless, as a condition precedent thereto, the Insured shall have fully complied with all the terms of this policy, nor until the amount of the Insured's obligation to pay shall have been finally determined either by judgment against the Insured after actual trial or by written agreement of the Insured, the claimant and the Company.
Any person or organization or the legal representative thereof who has secured such judgment or written agreement shall thereafter be entitled to recover under this policy to the extent of the insurance afforded by this policy. Nothing contained in this policy shall give any person or organization any right to join the Company as a co-defendant in any action against the Insured to determine the Insured's liability. Bankruptcy or insolvency of the Insured or of the Insured's estate shall not relieve the Company of any of its obligations hereunder.

Said policy was issued by a Minnesota insurance agent and was countersigned in Minnesota.

As of February 1, 1964, Roblee allowed to lapse the professional liability policy issued by Fireman's Fund American Insurance Companies, which had insured him while doing business as Joseph M. Roblee and Company.

Prior to about September 19, 1964, neither Roblee nor any of his employees or associates had any knowledge of the Capitol claim nor of the circumstances which resulted in the claim. On or about September 18, 1964, Capitol notified Roblee by letter that it was asserting a claim based upon accounting services performed by Joseph M. Roblee and Company prior to August 27, 1963. This letter is addressed to Joseph M. Roblee & Company, attention of Roblee. It states in part: "This is to advise you that the undersigned . . . represent Capitol Indemnity Corporation in their claim against your company for damages resulting from its reliance on various financial statements which were prepared by your accountants." (Emphasis added.)

On or about November 20, 1964, Capitol notified Johnson by letter that it was asserting a claim based upon the accounting services performed by Joseph M. Roblee & Company prior to August 27, 1963. The letter refers to Johnson as a registered principal and partner of Roblee-Johnson and Company, to said partnership as the "successor" of Joseph M. Roblee & Company, and further states "We have been informed that your firm carries the liability insurance which covers the claim in question."

On December 9, 1964, Roblee sent a copy of the September 18, 1964, Capitol letter to S.P.I. In an accompanying letter Roblee's attorney noted that Capitol's letter had been addressed to Joseph M. Roblee & Company, and further stated:

It is my understanding that your Company has in effect an Accountants' Professional Liability Policy No. 566LG8836, issued under date of December 15, 1963. The correct name of the insured, of course, is Roblee-Johnson & Company, which fact apparently was not known to the attorneys writing the letter.
It is the purpose of this letter to give you notice, under the terms of your policy, of this alleged claim.
The letter, photocopy of which is enclosed, was the first information of any kind received relative to same.

Receipt of this letter by S.P.I. was acknowledged on December 23 and 29, 1964.

Johnson never forwarded to S.P.I. Capitol's letter of November 20, 1964, nor any other pleadings relating to Capitol's claim.

Between December 30, 1964, and October 29, 1965, Capitol's attorney met with S.P.I.'s attorney on several occasions to discuss Capitol's claim. At least twice Capitol's attorney made an authorized offer to settle said claim for substantially less than $100,000 but received either no...

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