Conner v. Transamerica Ins. Co.

• Decision Date: 25 April 1972
• Docket Number: No. 44111,44111
• Citation: 496 P.2d 770,1972 OK 64
• Parties: L. L. CONNER et al., Appellees, v. TRANSAMERICA INSURANCE COMPANY, Appellant.
• Court: Oklahoma Supreme Court

Page 770

496 P.2d 770

L. L. CONNER et al., Appellees, v. TRANSAMERICA INSURANCE COMPANY, Appellant.

No. 44111.

Supreme Court of Oklahoma.

April 25, 1972.

Syllabus by the Court

In interpreting the language of an ambiguous contract of insurance, defining the scope of the insurer's liability, words of inclusion are liberally construed in favor of the insured and words of exclusion are strictly construed against the insurer. Accordingly, where insurer expressly agrees to defend insured against any suit, 'even if any of the allegations of the suit are groundless, false or fraudulent;' and such policy contains an exclusion clause providing that 'This policy does not apply to any dishonest, fraudulent, criminal or malicious act or omission of any insured, * * *;' such exclusion clause shall not be interpreted to mean that 'This policy does not apply to the defense of any suit charging the insured with any dishonest, fraudulent, criminal or malicious act or omission.'

Appeal from the District Court of Oklahoma County; Harold Theus, Judge.

Action by insured against the insurer under professional insurance policy to recover expenses incurred by insured in defense of suits charging insured with dishonest, fraudulent, criminal, and malicious conduct and omissions. Judgment for the insured. Insurer appeals. Affirmed.

Conner, Little & Conner, Merson, Campbell & Merson, Oklahoma City, for appellees.

Fenton, Fenton, Smith, Reneau & Moon, Oklahoma City, for appellant.

DAVISON, Vice Chief Justice.

This is an appeal from a judgment of the District Court of Oklahoma County in the sum of $2500 with interest in favor of L. L. Conner against Transamerican Insurance Company (Transamerica) and from a judgment against the same company in the sum of $2693.75 with interest in favor of Herman Merson and Wayne N. Campbell doing business under the firm name of Merson and Campbell. As indicated by the pleadings and the stipulation of facts, Transamerica, successor to the Pacific National Insurance Company (Pacific), denied obligation to defend Conner, a lawyer, under a professional liability policy issued by Pacific to Conner and denied obligation to defend Merson and Campbell, lawyer, under a professional liability policy issued by Pacific to Merson and Campbell. Without objection Conner and Merson and Campbell, each stating a separate cause of action, joined in one petition as plaintiffs against Transamerica as defendant to recover the expenses each plaintiff incurred and was required to pay due to defendant's denial of liability. Trial court designations will be hereinafter used.

The alleged necessity for defense arose when one Richard Wallach began a series of lawsuits against 35 defendants residing in Oklahoma, including plaintiffs. The occasion for the series of lawsuits, which were filed in the United States District Court for the Eastern District of Missouri, will be mentioned later. The defendant upon notification from each of plaintiffs took over the defense of each plaintiff but later without approval, consent and over the protest of each plaintiff, the defendant later notified their attorney to withdraw as counsel for each plaintiff as insurer for each. Counsel as notified withdrew. Each plaintiff, while continuing to notify defendant and make demand that defendant perform its obligations under each policy, was compelled to employ counsel who successfully represented each plaintiff to the end of the litigation. Each plaintiff was thus required to incur expenses which, allegedly, defendant under each applicable insurance policy was obligated to pay. The amount of the judgments is not questioned.

A non-waiver agreement had been entered into between each plaintiff and defendant which permitted defendant to enter upon a defense of each plaintiff without waiver of any rights or obligations of either of the parties under the insurance policy so that defendant could later withdraw if, as the result of developments by investigation and discovery it appeared that defendant had no obligation to defend or to assume liability under the policy.

As reflected by the stipulation, the facts relevant to a determination of defendant's liability under each of the involved professional insurance policies follows:

'In March, 1958, Richard Wallach of St. Louis, Missouri, purchased The Central Metal and Iron Company, an Oklahoma Corporation, engaged in the scrap business in Oklahoma City, Oklahoma; that subsequent thereto involuntary bankruptcy proceedings were instituted in the United States District Court for the Western District of Oklahoma. The petitioning creditors were represented by Bruce McClelland, and the plaintiff's herein, Merson & Campbell; that the bankrupt corporation was represented by Ungerman, Grabel, Ungerman and Leiter, of Tulsa, Oklahoma; that the plaintiff, L. L. Conner, was the local attorney for the Tulsa attorneys. Wallach was the President of the bankrupt corporation. The Bankruptcy proceedings were concluded and the creditors were paid their proportionate share of the assets of the bankrupt.

'That on or about the 1st day of December, 1963, Richard Wallach commenced an action in the United States District Court at St. Louis, Missouri, in the Eastern District of Missouri, Eastern Division, Cause No. 63C--447(3) against approximately twenty-seven defendants, including Internal Revenue officials, judges, The Governor, bankers and other lawyers and the plaintiffs herein. That after service of process on the plaintiffs defendants were notified and undertook defense of the case under their policies with plaintiffs. That on or about February 26, 1964, the trial court sustained the separate motions filed by defendants attorneys representing the plaintiffs herein to dismiss the complaint. Wallach appealed to the United States Court of Appeals for the 8th Circuit, in Case No. 17636. On March 11, 1966, the Court of Appeals affirmed the judgment of dismissal of the appeal as reported in 356 Fed.2d 557.

'On December 21, 1964, before the 8th Circuit Court had entered its decision in the first case, Richard Wallach filed a second case in the United States District Court for the Eastern District of Missouri, Case No. 64C--458(1), against the same and other numerous defendants, including the Plaintiffs herein. On January 1, 1966, the trial court transferred the case as to all of the Oklahoma defendants including the plaintiffs, to the United States District Court for the Western District of Oklahoma and the case was docketed as Case No. 66--264. On May 1, 1967, Judge Luther Eubanks in a written opinion, dismissed the action as to all defendants. Wallach appealed this case to the United States Court of Appeals for the 10th Circuit, Case No. 9561. The plaintiffs herein filed motions to affirm the order of the trial court and on Cotober 6, 1967, the Circuit Court granted the motions and dismissed the appeal. Wallach then filed a Petition for Writ of Certiorari in the Supreme Court of the United States, under 1080 Miscellaneous, October Term, 1967. On March 4, 1968, the Supreme Court denied the Petition for Writ of Certiorari.

'In All of the actions referred to and the various appeals Richard Wallach, a layman, acted without counsel.

* * *

* * *

'In the conduct of the bankruptcy proceedings and in all acts or omissions in connection therewith, all plaintiffs acted in good faith and in accordance with recognized proper and ethical standards of professional conduct as attorneys at law; that there were no dishonest, fraudulent, criminal or malicious acts or omissions of any of the plaintiffs; that the said bankruptcy proceedings were the only proceedings in which any of the plaintiffs had any dealings with Richard Wallach or any companies in which he may have been involved.'

We have examined the petitions filed by Wallach in the United States District Court for the Eastern District of Missouri, attached as exhibits to the stipulation of facts, and from this examination have concluded that each petition charges, only against each of plaintiffs, fraudulent, deceitful and dishonest conduct such as false affidavits, forgery, deliberate misrepresentations and the like, all as a part of an alleged comprehensive conspiracy to deprive Wallach of his property, that was implemented in part by the filing of involuntary bankruptcy proceedings against The Central Metal and Iron Company, in the United States District Court for the Western District of Oklahoma. Wallach was president of The Central Metal and Iron Company, and according to his practice had apparently 'bought into' the company after it had become insolvent.

The first of the petitions filed by Wallach against plaintiffs and others received the following interpretation by the Court of Appeals for the Eighth Circuit in Wallach v. Cannon, et al, 357 F.2d 557: 'Appellant was seeking to recover damages from all of appellees for conspiracy and collusion to cause him pecuniary injury through fraud in commercial transaction and alleged legal malpractice in the representation of him in relation thereto.' In deciding on the basis of...