MINNESOTA LIFE INSURANCE COMPANY f/k/a MINNESOTA MUTUAL LIFE INSURANCE COMPANY; RUSSELL LAVERNE BAYNE, JR.; CHARLES SPENCER BOYD; LISA WAGONER; AND MARTIN ROBERT WAGONER
COLUMBIA CASUALTY COMPANY d/b/a CNA AND/OR d/b/a "CNA INSURANCE COMPANIES"; CONTINENTAL CASUALTY COMPANY d/b/a CNA AND/OR d/b/a COLUMBIA CASUALTY COMPANY AND/OR d/b/a "CNA INSURANCE COMPANIES"
DATE OF JUDGMENT: 12/20/2011
JACKSON COUNTY CIRCUIT COURT HON. ROBERT P. KREBS TRIAL JUDGE:
ATTORNEYS FOR APPELLANTS: CHRISTOPHER COLLINS VAN CLEAVE CLYDE H. GUNN, III WILLIAM CORBAN GUNN DAVID NEIL HARRIS, JR.
ATTORNEYS FOR APPELLEES: H. BENJAMIN MULLEN JOHN A. BANAHAN REBECCA L. ROSS
BEFORE RANDOLPH, P.J., LAMAR AND KITCHENS, JJ.
RANDOLPH, PRESIDING JUSTICE
¶1. The Jackson County Circuit Court granted summary judgment in favor of Columbia Casualty Company and Continental Casualty Company (collectively "Columbia"), finding there was no wrongdoing in denying coverage to four former insureds (collectively "Ex-Agents") and Minnesota Mutual Life Insurance Company ("Minnesota Life"). The trial court also denied the Ex-Agents' and Minnesota Life's motion to strike certain affidavits and exhibits submitted by Columbia in support of its motions for summary judgment and in defense of the Ex-Agents' and Minnesota Life's summary judgment motions. We find that the trial court properly denied the motion to strike and properly granted summary judgment in favor of Columbia as to Minnesota Life's claim but erred in granting summary judgment as to the Ex-Agents' claims. Therefore, we affirm in part and reverse in part and remand.
¶2. In 1997, Martin Wagoner, Lisa Wagoner, Charles Spencer Boyd, and Russell Bayne (collectively "Ex-Agents") were employed by C. Douglas Gulley Jr. and Associates, Inc., ("Gulley Agency") as agents for Minnesota Life. Douglas and all the Ex-Agents were afforded the opportunity to purchase coverage under an Insurance Agents Errors & Omissions Policy. Gulley and the Ex-Agents separately purchased and paid for such coverage. A policy was issued by Columbia, covering the period March 1, 1997, to March 1, 1998 ("1997 Policy). This policy subsequently was renewed by the policyholder, Minnesota Life, for the period March 1, 1998, to March 1, 1999 ("1998 Policy").
¶3. Minnesota Life was the named policyholder of the 1997 and 1998 Policies. The policies defined an "insured" as a contract agent and any business entity engaged in professional services which employs the insured. A "contract agent" was defined as an agent who is under contract with Minnesota Life.
¶4. Under the policies, Minnesota Life also was listed as an "additional insured" pursuant to an endorsement,  entitled "VICARIOUS LIABILITY COVERAGE: Co Defendant - Defense Costs Only, " which limited its liability. The endorsements specifically stated:
In consideration of the premium charged, it is hereby understood and agreed that Minnesota Mutual Life Insurance Company and the companies represented in Item 7 of the Declarations shall be additional Insureds under this policy, but only under Coverage Agreement B and only when it is named as a co-defendant in a Claim against the Insured due to a Wrongful Act attributable solely to an Insured/Agent and not due to any independent negligence or bad faith of Minnesota Mutual Life Insurance Company and/or the companies represented in Item 7 of the Declarations. Coverage provided pursuant to this endorsement shall be subject to all of the terms, conditions and exclusions of the policy to which this endorsement is attached.
All other terms, conditions and exclusions of this policy remain the same.
(Emphases in original and added.)
¶5. The policies were claims-made policies, meaning coverage is triggered when a claim is made against the insured during either the policy period or the extended claims-reporting period, if applicable. In capital letters and separated by a box at the top of page three was the following statement:
THIS IS A CLAIMS-MADE POLICY AND, SUBJECT TO ITS PROVISIONS, APPLIES ONLY TO ANY "CLAIM" FIRST MADE AGAINST THE INSURED DURING THE POLICY PERIOD. NO COVERAGE EXISTS FOR CLAIMS FIRST MADE AFTER THE END OF THE POLICY PERIOD UNLESS, AND TO THE EXTENT, THE EXTENDED CLAIM REPORTING PERIOD APPLIES.
The COVERAGE section of the policies specifically provided that:
The Insurer shall have the right and duty to defend any Claim or suit against the Insured seeking sums payable under this Insurance, even if any of the allegations of the suit are groundless, false or fraudulent. The Insurer may make such investigation and with the written consent of the insured, make settlement of any claim as it deems expedient, but the Insurer shall not be obligated to pay any claim or judgment or to defend any claim or suit after the applicable limit of the Insurer's liability has been exhausted by payment of judgments or settlements.
The COVERAGE section also stated that a "wrongful act" must occur during the policy period or after the policy period if (1) at the time of the effective date of the policy, the insured had no knowledge of any wrongful act and (2) "there is no other valid and collectible insurance available to the Insured for any such Wrongful Act." (Emphases in original and added.) The policies excluded "any Claim based upon, or arising out of any dishonest, deliberately fraudulent, malicious or knowingly Wrongful Act, error or omission committed by or at the direction of the Insured." (Emphasis in original.)
¶6. The policies provided the following notice requirement:
Upon any Insured becoming aware of any Wrongful Act which would reasonably be expected to result in a Claim against any Insured, written notice with all available particulars shall be given by or for the Insured to the Insurer or its authorized representative. If a Claim is made or suit is brought against any Insured, the Insured shall as soon as practicable during the Policy Period, or during the Extended C laim Reporting Period, if applicable, notify the Insurer and immediately forward to the Insurer every demand, notice, summons or other process received.
. . . Written notice shall be sent to the Insurer to the attention of: Professional Liability Claims Manager CNA Financial Insurance Group CNA Insurance Companies NY, NY 10038.
(Emphasis in original.)
¶7. The policies permitted claims against the Insurer only when "the Insured shall have fully complied with all the terms of this policy, [or] 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, claimant and the Insurer." (Emphasis in original.) Additionally, the policies provided that the "Insured shall not, except at their own cost, voluntarily make any payment, assume any obligation or incur any expense." (Emphasis in original.)
¶8. The policies' excess (or other insurance) provision was amended to state:
If the Insured has other insurance in force which would apply to a Claim also covered by this policy, including but not limited to the Automatic Extended Claim Reporting Period and/or if elected, the Optional Extended Claim Reporting Period . . . this policy shall be excess over such other valid and collectible insurance and shall then apply only in the amount by which the applicable Limit of Liability of this policy exceeds the sum of the applicable Limit of Liability of all other insurance.
(Emphases in original and added.)
¶9. Finally, the policies did not allow an Extended Claim Reporting Period "[i]f the Insured is issued the same or similar policy with this Insurer, or any other Insurer. . . ." (Emphasis in original and added.)
¶10. In late 1997, the Ex-Agents began to suspect that Gulley was embezzling funds from clients. On December 22, 1997, the Ex-Agents informed Minnesota Life of their suspicions and provided Minnesota Life with evidence of Gulley's embezzlement. Upon receiving this information, Minnesota Life took no immediate action.
¶11. On January 30, 1998, each Ex-Agent individually resigned from the Gulley Agency. On February 1, 1998, the Ex-Agents founded Cornerstone Group, LLC, which is affiliated with Linsco Private Ledger ("LPL"). On February 2, 1998, the Ex-Agents' contracts with Minnesota Life were terminated. Upon joining LPL, each Ex-Agent obtained separate errors and omissions coverage ("AIG Policy") issued by American International Specialty Lines Insurance Company ("AIG").
¶12. On March 16, 1998, the Mississippi Secretary of State's office began investigating the records of the Gulley Agency and, from that investigation, determined that Gulley had misappropriated client funds. In July 1998, four cases were filed against Gulley, the Gulley Agency, Minnesota Life, and the Ex-Agents. Each complaint alleged that the wrongful acts occurred while the Ex-Agents were employed by Minnesota Life. Each complaint alleged causes of action for breach of fiduciary duty, misrepresentation and concealment, breach of implied covenant of good faith, continuing breach of contract, negligence, negligent infliction of mental and emotional distress, misrepresentation, and malpractice. As to Minnesota Life, each complaint specifically alleged that Minnesota Life participated in and/or had knowledge of the intentional taking of monies. As to the Ex-Agents, the complaints specifically alleged that they should have known that Minnesota Life and/or Gulley were misappropriating funds. On July 17, 1998, after receiving notice of these claims filed against them, the Ex-Agents met with and retained Clyde H. (Buddy) Gunn to defend them.
¶13. Several days after retaining Gunn, the Ex-Agents notified Minnesota Life's broker, AON, and AIG's broker, Barney & Barney, that they had been named as defendants in four lawsuits related to Gulley's embezzlement of funds. Included in the Ex-Agents' notification of AON was an Errors and Omissions Claim Report. The Claim Report asked that all other Errors and Omissions insurance policies be identified, and the Ex-Agents stated they presently had insurance policies issued by AIG. The form specifically required that notification of the claims be made to AON. A O N then provided copies of the four com plaints to Traub, Eglin, Lieberman & Strauss ("TELS"), a law firm which provided legal advice to Columbia concerning any legal issues that arose in regard to the claims under Minnesota Life's agents' policies. The notifications provided TELS with copies of the complaints identifying the claims made against Minnesota Life and the Ex-Agents. The ...