Continental Casualty Company v. Reinhardt

• Decision Date: 12 August 1965
• Docket Number: Civ. No. 64-512.
• Citation: 247 F. Supp. 173
• Parties: CONTINENTAL CASUALTY COMPANY, a corporation, Plaintiff, v. Justin N. REINHARDT, Seymour L. Coblens, Norman A. Stoll and Morton A. Winkel, Defendants.
• Court: U.S. District Court — District of Oregon

247 F. Supp. 173

CONTINENTAL CASUALTY COMPANY, a corporation, Plaintiff, v. Justin N. REINHARDT, Seymour L. Coblens, Norman A. Stoll and Morton A. Winkel, Defendants.

Civ. No. 64-512.

United States District Court D. Oregon.

August 12, 1965.

Kenneth E. Roberts, Mautz, Souther, Spaulding, Kinsey & Williamson, Portland, Or., for plaintiff.

Walter H. Evans, Jr., Portland, Or., for defendant.

KILKENNY, District Judge.

On January 4, 1963, plaintiff issued its Lawyers' Professional Liability Policy, to defendants Reinhardt, Coblens and Stoll, partners engaged in the practice of law in the state of Oregon. Later, defendant Winkel was included as a named assured. The policy, among other things, provided as follows:

* * * * * *

"I. Coverage

To pay on behalf of the insured all sums which the insured shall become obligated to pay by reason of the liability imposed upon him by law for damages resulting from any claim made against the insured arising out of the performance of professional services for others in the insured's capacity as a lawyer or a notary public and caused by any act, error or omission of the insured or any other person for whose acts the insured is legally liable.

II. Defense, Settlement, Supplementary Payments

As respects such insurance as is afforded by the other terms of this policy the company shall

(a) defend in his name and behalf any suit against the insured alleging such act, error or omission and seeking damages on account thereof; even if such suit is groundless, false or fraudulent; * * *." (Emphasis supplied.)

* * * * * *

"This policy does not apply:

(a) to any dishonest, fraudulent, criminal or malicious act or omission of the insured, any partner or employee; * * *."

* * * * * *

Mr. Winkel, and one of the partners, represented Mansfield & Co., a creditor of Metropolitan Materials Company. The Materials Company was insolvent and defendant lawyers were unable to collect a judgment against Materials, due and owing to Mansfield.

The principal actors of Materials, included a Mr. Kalkhoven and a Mr. Fordham, the latter being a certified public accountant. Winkel threatened to bring an action against Fordham and other principals individually upon the theory that they misrepresented the financial status of the debtor and, relying upon this misrepresentation, Materials induced Mansfield & Co. to extend credit to the latter's detriment. Winkel threatened to send a copy of the complaint to the State Board of Accountancy. Fordham refused to assume personal liability for the debtor and Winkel, on behalf of his client, filed an action against Fordham, and others, in the Multnomah County Circuit Court alleging that false financial statements made by Fordham in connection with the extension of credit to Metropolitan and upon which Mansfield relied in selling insurance to Metropolitan were false, were known to be false when prepared, and were presented to Mansfield to induce it to extend credit.

A second cause of action was grounded upon the personal liability of Fordham as a director of Metropolitan for operating without sufficient capital, which jeopardized Metropolitan's contractual obligations to the prejudice of creditors.

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