Home Savings & Loan v. Aetna Casualty & Surety Co.

information applications contained BENCH, Before BILLINGS and later, was correct. days Two GREENWOOD, report- Glad JJ. ed that all of applicants were still inter- began process ested. Glad then to the loan OPINION applications. Home claims that Glad al- GREENWOOD, Judge: tered applications loan to increase the in- Casualty Surety Company ap- come, credit, equity and home of the AFCO peals ruling the trial court’s that a loss they investors so that qualify would Savings incurred Home and Loan was larger loans. Home also claims that while by fidelity covered a bond issued to Home processing applications the loan Glad by Aetna. forty-two Home made a total of caused persons sign unauthorized some mortgage second loans to individuals of the loan documents. (AFCO investors) who had been referred to pressured personnel Affleck Home ap- pro- Home Grant Affleck. The loan prove quickly. the loans One of Affleck’s AFCO, ceeds were invested in which was employees was even “loaned” to Home in Following controlled Affleck. the finan- expedite approval order to process. AFCO, cial demise of Affleck and given Home claims to have Glad and Elaine brought AFCO investors suit Home Reese, Home, a loan closer for specific because of its involvement with AFCO. instructions to make sure that one of them Home lost the lawsuit and was ordered to present every closing. Glad, was loan return mortgage the second notes and however, gave the loan documents to Af- investors, trust deeds to the AFCO fore- fleck and Affleck closed the loans himself result, going, any as a further collection on without Home being present. thereby loans. Home signif- incurred a icant loss which it claims was covered closing One of the documents was a no- Aetna’s bond. Aetna denied cover- right tice of the borrower’s to rescind the age brought and Home this suit. Follow- loan at time within days three ing trial, jury the trial court ruled that closing. Reese, instruction, on Glad’s back- Home’s loss was covered the Aetna dated the rescission notices and other clos- We affirm. ing expedite documents in order to the dis- bursement of the backdating loans. The

FACTS was intended to create the illusion that the During arranged Affleck right expired sever- borrowers’ to rescind had on lending al institutions to issue day second-mort- or before the actually loan was gage people loans to who were interested thereby closed. Home was able to disburse investing sought AFCO. proceeds AFCO the loan day on the same as the financing because it experiencing closing. crit- lending made learned institutions had similar Home mid-December engaged mortgage dishonest loans AFCO investors.

that Glad second in- Alcorn, unrelated to AFCO designated fraudulent acts complaint, et al. Included in these acts was vestor loans. al., Affleck, upon et was served v. Grant on a loan made receipt of kickback Glad’s complaint April 1982. The AFCO, even- a loan that AFCO directly to irregularities in the loans listed numerous promptly terminat- tually repaid. Glad was sought declaring the represent po- that loans a cluded “[t]hese arrange- apparently made this vestors had large legal and/or ex- tential losses However, to attempted ment. Home when After penses to the institution.” discuss- check, it to cash was returned due pending in ing the Alcorn lawsuit then insufficient funds in AFCO’s account. court, bankruptcy made examiner 26, 1982, a February On Affleck sent following its report: observation in time requesting letter Home additional to Management expects that there “[Home’s] mortgage cur- bring the second loans attempts frustrate the will be further rent. informed Home that there were He mortgage foreclosures the second trust [of potential problems the loans because validity of by challenging the deeds] in documents had been backdated loan underwriting.” and documentation right order of the AFCO to eliminate the loans. He also investors rescind 1982, May agent In an Aetna insurance had informed Home that he closed proposition with the approached Home any employ- Home personally loans without savings replace its and loan blanket Home requested the being present. ee Affleck bond, Fidelity Deposit issued and Com- “any in order direct le- extension to avoid (F D),& and pany Maryland due gal taken action from individuals 1982, 21, Aetna expire with an June mortgage 2nd out the above referenced completed application form Home an Aetna loans.” asked, among things, other whether 8, 1982, On AFCO filed for bank- March insurable losses Home had sustained ruptcy. At board directors’ Home’s truthful- past years. five Home within 17, 1982, meeting held on March Home’s no such ly responded that it sustained legal to the counsel indicated board deductible amount. losses over the $5000 despite position AFCO’s Home’s was sound 14, 1982, the Aetna July the sale of On bankruptcy because the “documentation completed. The bond to Home was of the loans.” in Form identical was a Standard F & D bond it to the form 1982, April approximately hun- three coverage in a replaced. provided for It plaintiffs complaint filed dred the Unit- in $1,135,000 up principal amount against Af- Bankruptcy ed States Court 21, 1982, fleck, AFCO, years of three from June period and numerous other defen- Aetna dants, Home and subse- including and sixteen other to June 1985.2 Home notification, repayment notification was of those loans. This 1. also received in the Home other April in 1982. received March attorneys, form from of lawsuits and letters alleged improprieties AFCO loan investor date made retroactive 2. The bond’s effective was processing avoid investors’ intent provide continuous cov- order to Home with agreed later, quently coverage peri- Nearly year 14, 1984, to extend the August on August through od 1986. jury the Armitage special returned ver- dicts Judgment Home. in the case bankruptcy court abstained from February entered on 1986. Pursu- hearing complaint part the Alcorn as judgment, ant to the Home was barred bankruptcy. It AFCO therefore dis- foreclosing mortgage on the second complaint July missed the Alcorn trust from seeking deeds and refiled, complaint essen- form, loans AFCO investors. tially the same in federal district Abbott, Aetna was still effect at day court on same as et al. v. Shaffer, al. The time. et action then sev- ered several into different lawsuits each sought indemnification under the particular naming a financial institution as loss, Aetna bond for the Armitage claiming relating defendant. lawsuit to Home that the loss was the result of direct thirty-six styled involved loans and was dishonesty of its former employee, Larry Armitage Savings v. Home and Loan. Glad, was, therefore, covered 9, 1982, On December counsel for Home Aetna responded bond. Aetna that the loss sent giving a letter to Aetna formal notice was not covered under the terms of the being of the claims made the AFCO bond indemnify and refused to Home. borrowers the Armitage case. In the brought Home then this lawsuit. letter, notice Home’s counsel indicated that for summary judgment, moved discovery in case had uncov- claiming that the Armitage loss was not ered the likelihood of of Home covered the bond because was “dis- employees processing the AFCO investor loans, prior covered” creating period of coverage the likelihood that Home case, provided lost by response, the such loss fall the bond. In would within Home coverage. the bond's moved construing Aetna for a court order the then began monitoring case. the “discovery” language of the bond mean the discovery of an actual loss sustained 30, 1983, September On Aetna elected to and not discovery potential the of a loss. not assume defense of Armitage litiga- the The trial court denied Aetna’s motion for gave tion. Aetna three reasons for this summary judgment concluding, as a matter First, decision. Aetna claimed its bond law, “discovery that of a loss” necessar- would not cover losses during sustained the ily meant the of a “loss sus- coverage period of the F & D bond it tained.” The trial court reasoned that even replaced, except to the extent that such though may Home have known about losses exceeded the F & D coverage dishonesty earlier, Glad’s it could not have Second, amount.3 Aetna concluded that discovered “loss sustained” until the Ar- the in borrowers’ claims the various com- mitage jury August rendered its on plaints verdict acts were attributed to of Home 14, 1984, event employees which occurred within the that were committed “at the di- coverage period of the The rection and for bond. trial the benefit of Home granted court then Savings.” Such Home’s acts did fall motion not within the construing order the bond’s definition of Aetna bond and ruled dishonesty and, therefore, ‘loss,’ “plaintiff proven, even if sustained a would not fall term fidelity coverage contemplated within the ‘loss’ Aetna Third, Bond, stated, bond. appears August “it on Accordingly, 1984. many plaintiff the claims have been discov- discovered its ‘loss sustained’ dur- 6-21-82, prior ered ing date on period in Aetna Bond was ef- this issued.” fect.” erage following expiration fully of the F & D cussed more our treatment of Aetna's discovered, argument as to when the loss was assumption was not correct. apparently

3. Aetna assumed the loss was sustained when the loans were made. As dis- (6) dishonesty; over than Glad’s Home’s loss dispute lasted four Trial of this calculated, By- improperly in that and November certain weeks October verdict, jury Home; outlays found that special loan were returned (7) thirty-six loans thirty-four legal on should recover Home Armitage lawsuit was against Armitage voided costs it in the awarded Glad, case, dishonest conduct caused legal nor all of its own costs incurred dishonesty first discovered Glad’s defending that case. 1981, and Home in mid-December that time was discovered at OF STANDARD REVIEW—INSURANCE By loans. to the AFCO investor unrelated CONTRACT INTERPRETATION interrogatory, jury also found special interpretation of a nor contract unintentionally failed to that Home had presents question mally Village of law. pre- facts that would have inform Aetna of Apartments Inn v. Farm State Fire and during issuing the bond vented Aetna (Utah Co., App. Casualty P.2d process. application the bond 1990). regard the Aetna as a We special interpreted the The trial court insurance, give and therefore contract interrogatory findings special verdict and particular to the trial court’s deference granted judg- Home to be favor of interpretation Hospital of the bond. LDS judgment, ment Aetna. Under Capitol Ins. P.2d Life principal to pay Aetna was ordered lost (Utah 1988). thirty-four dishonestly processed on begins interpretation Contract loans, deductible, the bond’s $5000.00 less an examination of the contract itself $889,812.46; totaling legal costs awarded parties. determine the intentions of Id. plaintiffs against Home of Armitage interpreted in a document should be $190,647.31; legal costs incurred provisions manner harmonize all of its $437,- defending Armitage suit terms, possible. to the extent Id. 500.00; and interest and court costs related case. to this case and of whether a con i.e., provision ambiguous, suscepti arguments ap- Aetna raises seven tract 4 (1) dishonesty interpreta to more peal: ble two or reasonable because Glad’s tions, Village also a of law. known to Home before the Aetna bond is effect, at 582. Apartments, Inn 790 P.2d Gener went into bond never covered ally, ambiguous provisions will con by any dishonest losses caused of Glad’s conduct; (2) of the contract prior against Home its loss strued drafter discovered clarify fails to Aetna went into ef- extrinsic evidence time the bond covered; fect, parties. intent v. Inter and the loss is not therefore Wilburn 582, Electric, (Utah (3) 748 P.2d 585 failure to inform Aetna of the state However, App.1988). an insurance problems investor loans where AFCO (4) concerned, ambiguous provi coverage; application voids contract bond usually against the in trading in sions construed the loss was related are because evidence, securities, surer resort extrinsic is excluded from the bond’s without ordinarily (5) are coverage; jury improp- instructions because insurance contracts forms, finding language is not ne erly prevented jury from standard whose 2; parties. at n. by gotiated by its own mis- Id. LDS Home’s loss was caused P.2d 858.5 poor Hospital Capitol Life, 765 management judgment rather v. briefs, Sharp eighth alleged See v. Federal Sav- Aetna Loan Associations. In raised 4. 1042, (5th join ings Corp, court's F & D as error the trial refusal Ins. F.2d 1046 & Loan 858 indispensable party, necessary This, however, but change aban- Cir.1988). does argument. point doned that at oral Home, that, fact as between Aetna and particular drafting say this little case, points Aetna product out that Standard language re- bond. Nor does length negotia- arms’ Form 22 is the originators Form 22 flect of Standard Surety tion between the Association America particular provided contemplated for the Savings League and the States United 348 1981,

Aetna’s as well as various riders December section eleven of the F & therein, incorporated was such a standard D coverage bond terminated for losses form. by any subsequent caused dishonest con- by duct Glad. employer Once an is on excluding coverage Provisions are employee’s notice of an dishonesty, the fi- strictly against also construed the insurer. delity required insurer cannot be to indem- Hospital Capitol Life, LDS 765 P.2d at nify resulting losses from similar subse- 859; Valley Bank & Trust Co. v. United quent by employee. conduct that same It Dallas, States Title Ins. Co. Life quite proper to shift the risk of loss due 933, (Utah App.1989). Similarly, P.2d employee dishonesty from the insurer to ambiguities applications in insurance will the insured once the insured knows of the insurer, be construed to avoid dishonesty, employ- but elects to retain the coverage denial of alleged because of mis ee. 13 Couch on Insurance 2d 46:247 § representations. E.g., Wardle v. Interna (1982). Co., tional Health & Ins. 97 Idaho Life 668, (1976); also, 551 P.2d see proper It is also to refuse (1984). 2d Couch On Insurance 15:90 § for losses caused an employee whose mind, foregoing proceed With the we dishonesty is employer known to the even analysis. our if the through conduct which the dishon esty is revealed is subsequent unrelated to SECTION ELEVEN actually conduct that causes a loss. St. Joe Aetna’s first contention is that its Paper Co. v. Accident & Indem Hartford all excludes losses (5th nity Cir.1967) 376 F.2d conduct, caused Glad's dishonest be (modifying and affirming 359 F.2d 579 cause Glad’s was known to (1966)), denied, cert. 389 U.S. 88 S.Ct. Home before the Aetna bond went into (1967). 19 L.Ed.2d 86 Thus neither the effect. The relevant is contained F & D bond nor the Aetna bond would have in section eleven of the identical F & D and covered any Home for dishonest conduct bonds, pertinent Aetna part pro Glad, occurring after mid-December 1981. vides: “This bond shall be deemed termi nated or cancelled as to Employee (a) argues that because Glad was — as soon as the Insured shall learn of known to be dishonest before the Aetna dishonest or part fraudulent act on the effect, of bond took its bond was void ab initio Employee....” as to losses caused any and all of Glad’s conduct, dishonest whether such conduct The facts relevant to Aetna’s contention occurred before or after mid-December are as follows: Home’s loss was caused 1981. Aetna support cites several cases in processing Glad’s dishonest of the AFCO position, of its which we examine in some investors’ loans in early November and De- detail. cember 1981. “any Home first learned of by dishonest act” Glad in mid-December by Three cases cited Aetna involve em 1981, when it learned of dishonest conduct ployee fidelity insurance that was void ab loans, unrelated to the AFCO investor and initio employees as to certain of the in promptly fired him. Glad’s dishonest in- sureds. Ritchie Grocer Co. v. Aetna Cas processing vestor loan and Home’s subse- (8th ualty & Sur. 426 F.2d 499 Cir. quent discovery of Glad’s other dishonest 1970), Verneco, and Inc. v. Fidelity & Cas conduct occurred while the F D& bond was York, ualty Co. New 253 La. 21, 1982, in effect. On June F the & D (1969), fidelity So.2d 508 involved loss in superseded bond by was the Aetna bond. eleven-type surance that contained section agree Aetna and Home provisions. that once Glad’s The in insured each case hired dishonesty became known to Home in employee, knowing mid- an employee that the

problems wise, present dispute. we face in the While the absence of such evidence leaves us specific regarding bond, evidence construing Home’s and Aetna’s with the basic rule of might unclear, persuade intentions here us to do other- where in Home’s favor. however, Here, employees then Home was covered under history of theft. The had insureds, dishonesty F D when who were the & bond Glad’s money from stole under the became known. Under section eleven of recovery for losses denied bond, and consistent with Rit- F they knew of the & D policies insurance because Verneco, chie Grocer coverage the out Home’s dishonesty from employees’ their Therefore, pol under F D & bond terminated with employment. of the set respect by conduct covered loss caused dishonest that Glad icies never Similarly, might employees’ engaged in after Home learned dishonesty. dishonesty, of his Payer, Joe an insured but continued for losses St. 376 F.2d prior likely by caused his employee’s of its dis dishonest conduct became aware argues fidelity employ. its honest conduct before the relevant bond, bond, replaced F & D did was Losses loss insurance issued. attribut coverage. not continue this dishonesty same course of Aetna cites able Fidelity Casualty New Co. York under the not recoverable were therefore Houston, Bank Central 672 S.W.2d 641 policies. Douglas Wilson & C. (Tex.App.1984), Verneco, in- Ritchie Grocer In America, v.Co. Insurance Co. North already employees were sureds hired who denied, (4th Cir.), cert. 590 F.2d 1275 consistent known to be dishonest. It was (1979), U.S. 100 S.Ct. 62 L.Ed.2d 39 Couch policy enunciated position. its support of coverage Insurance deny insurance for Central Bank involved renewal subsequent dishonest con- losses caused employees: provi- the risk of with the same section eleven duct of those such who, properly upon fell the insureds sion as the bond in here. losses insurer, prior despite employee dishonesty, issued the same was awareness However, opted employees. identical. The insured bank learned that hire the case, present employees two Glad’s did not one its was dishonest by Home until after he had months renewal bond was is- become known before sued, already engaged coverage employee in the dishonest conduct so that for under eleven of the recovery the losses for which had terminated section caused under the Aetna bond. Ritchie sought prior discovery. was bond after bank Verneco, therefore, Grocer sought are the renewal arising from as to whether Home was covered for various losses the dishon- decisive employee. est for those losses. conduct Paper, Bank court held St. Joe Central put the conduct that employee’s notice of did not “reinstate insured on dis- renewal bond already honesty part conduct that for that had been ter- same act; a known dishonest it sim- caused losses which insurance cov- minated existed whatever erage Again, proper ply denied. continue[d] at time renewal.” deny the effort insured’s to shift risk of S.W.2d added). (emphasis from itself to It was therefore caused conduct insurer, void policy unnecessary where the insurance insurer raise a coverage question purchased not until after the ab initio defense was Id. dishonesty by was employee’s known renewal bond. Thus insurer was by employee insured de- not for losses caused dishonest and the was retained liable af- spite knowledge. appears employee that occurred It that the conduct of Paper dishonesty How- St. Joe insured did not have ter his became known. ever, the insurer was liable employee’s under the re- insurance at the time its arising dishonesty pos- not newal for losses from became known. It was bond coverage employee’s that had oc- sible to obtain for losses caused dishonest conduct by dishonesty he was found to dishonest. employee’s where there curred before Id. not prior coverage coverage at all. This terminat- had been no 650. insurers, prior bond and continued un- from different all of ed under which con- coverage provisions tained termination der the renewal bond.6 es- sentially identical to section eleven of the Bank, if Central Under Home had elect- Wilson, here, bonds in this case. as bond, ed to renew its F & D the renewal employee engaged insured’s in certain dis- have covered the losses bond would original while the honest conduct bond was here, because those losses arose effect, not, but the insured did at that conduct took from Glad’s dishonest time, employee’s dishonesty. learn of the place learned that before Home Glad was Later, original while the bond was still coverage dishonest. Such would not be a effect, other, the insured learned of un- coverage, of terminated reinstatement but by related dishonest conduct the same em- simply existing coverage. a continuation of ployee, discharge but did not him. Nine bond, renewing Instead of the F D& how- days learning after employee its was ever, replace Home elected to it with an dishonest, original expired and the argues identical bond from Aetna. Aetna replacement bonds went into effect. One that, insurer, compelled as a new it was not later, month the insured learned of the coverage resulting to assume for losses earlier employee, dishonest conduct of its pre-mid-December from 1981 dishon- Glad’s whereupon employee discharged. esty, if even such losses would have been case, present As in the the loss for which by F covered a renewal of the & D bond. sought recovery the insured by was caused Wilson supports position. Aetna’s conduct, the earlier dishonest and not Wilson original employee involved an fi- through employee’s the conduct delity pair replacement dishonesty bond and a bonds first known. became acknowledged by parties, place employee As Central Bank before the was known to be confusing appears to read at first. It dishonest. support argument Aetna’s void ab initio in that argues the actual distinction in point it states at one that Central Bank’s loss employee Central Bank was not dishonest con- coverage employee as to its dishonest terminat- occurring employee duct before versus after the 11, 1974, ed on December the date the renewal dishonest, became known as but between cover- 650; issued. 672 S.W.2d at see id. at age under the renewal bond and that under the jury 647. The in Central Bank is described as prior bond issued the same insurer. How- having employee’s found that the bank dishon- ever, nothing opinion in the Central Bank indi- esty became known "before December cates that the insured’s allowed 1974,” implicitly id. at then is described as prior under the or that the insured even finding precisely more that the came Instead, upon prior its claim based light on October 1974. Id. at 646. We that, we are satisfied consistent with the above- find the confusion to be resolved reference quoted language, portion of Central Bank’s holding appellant to the court’s discussion losses that were held recoverable were so held argument insurer’s void ab initio to be unneces- on the basis of the renewal bond’s continuation sary: coverage that had not terminated under the jury’s special answer to issue sixteen did prior bond. appellant liability not absolve for losses opinion The Central Bank also does not clear- October, occurring after 1974 because the re- ly distinguish between the occurrence of an newal bond which was issued December employee's dishonest conduct and the occur- Rather, inception. was void its losses, any, specific rence of the caused appellant liability is absolved of for these Rather, episode analysis of such conduct. [post-October losses because a 1974] renewal appears episode to assume that an of dishonest policy coverage does reinstate for an em- gives roughly contemporane- conduct rise ato ployee already that had been terminated ous loss. While that have been the case in act; simply known dishonest continues Bank, Central it is not what occurred here. Our whatever existed at the time of re- analysis focus for section eleven is on when unnecessary appellant newal .... It was employee dishonesty becomes known to the fi- plead may rely a void ab initio defense. It institution, defense_” terminating coverage nancial bond termination by subsequent losses caused dishonest conduct. added). (emphasis passage Id. at 647 This indi- Losses attributable to dishonest conduct that the cates that dishonest date, employee engaged dishonest, however, being in before revealed as did not terminate on the bond renewal but already remain covered under sec- rather that it had terminated at that eleven, "continuing coverage” time. The tion even if the losses themselves do not under the re- coverage employee newal bond refers to for losses caused become known until after the is by employee’s the dishonest behavior that took found to be dishonest. tion, susceptible interpretation and held because court that The Wilson dishonesty employee’s knew of its it does not bar the continuation of the insured that into replacement went coverage bonds fidelity before same under Aet- not effect, the insured did and because F D na bond that existed under the & bond. of to the issurers disclose the Therefore, utilizing rules of construction bonds, never those bonds replacement contracts, insurance we con- applicable to any by to losses caused went into effect as provide coverage eleven to strue section Wilson, dishonesty. employee’s promotes pre- a construction here. Such Therefore, losses caused F.2d at 1279. coverage dictability and minimizes of dishonesty were not cov- by employee’s Therefore, impact luck or chance. bonds, even replacement ered under the coverage for caused we hold that losses from dishonest though those losses arose conduct, dishonest where con- Glad’s in- behavior that had occurred before he duct occurred before learned that employee was dishonest. sured learned its dishonest, and where footnote, that had In a the court indicated would such losses have continued under original to the insured elected extend bond, of the F D is not barred renewal & bond, covered those that bond would have by section eleven of the Aetna bond. at 1279 n. 6. The court stated losses. Id. holding supported by is the absence Our position in which the “unfortunate that, suggesting any extrinsic evidence part in Wilson finds itself was occasioned issued, at the time the Aetna bond was timing in as by sheer bad luck to parties provide that it would di- intended insurers_” change in Id. at 1280. coverage compared provid- minished to that persuasive. Its We do not find Wilson D under F & The Aetna sales ed bond. analysis re- is because troublesome agent prepared proposal, the Aetna bond to places liance it on sheer luck determine part: propose “I a bond be which read a whether certain losses are covered under replace 21 to issued effective June fidelity even a replacement where provide It present bond. will retroac- full cover prior renewal of the bond would will issued coverage. tive The bond be dissent, them. As stated the Wilson through Casualty Surety Compa- Aetna purpose in- analysis “defeat[s] added.) is no ny.” (Emphasis There evi- recovery on chance.” surance base[s] any par- between the dence discussions (Hoffman, con- Judge, Id. at 1291 District application process during the bond as ties part). curring part dissenting We by the F D any covered & bond to risks purpose observe that fundamental not to be covered un- that would continue relationship contract is define identically-worded der the contracting parties provide the maxi- stability predictability holding sup- possible mum is also Our section eleven minimizing the relationship, thereby understanding of the risk- ported our or luck. effect chance shifting of section eleven. The purpose hiring employee an who retention of scrutiny eleven of the Our of section effectively a con- known to dishonest reveals no that man- Aetna bond risk of loss decision to increase the scious reached in As dates the result Wilson. dishonesty. elev- employee Section due authorities, foregoing interpreted such in- en-type provisions properly shift losses Glad clearly bars employer. fidelity creased loss risk might subsequent have caused mid-De- hand, firing the dishonest On other him. cember had Home not fired that some employee does not affect risk However, itself, simply the section does employ- committed before the dishonest act questions ongoing coverage address result was found to be dishonest will elev- ee between successive insurers.7 Section changing affect is, therefore, ambiguous ques- does insurers on that a loss. Nor en contrast, replacement replacement reinstated under the bonds could not be 7. one agreement in writ- provided canceled bond without additional Wilson prior ing. particular 590 F.2d give agreement requires a Limitations the insured to risk. Absent clear this contrary, purchases re- prompt an insured who notice of loss to Aetna: “At the fidelity placement employee practicable earliest moment after prior identical to the cover- appears to be any of loss hereunder the shall Insured coverage that age be entitled to is should give the written notice Underwriter thereof respect to section eleven fact identical with and shall also six months after such within limitations. discovery furnish to the Underwriter af- proof particu- of loss with full firmative sum, In section eleven does bar lars.” recovery long from Aetna. So the loss caused Glad’s dishonest behav- Rider 6091 to the section four notice re- peri- within the effective ior was discovered quirement “discovery defines the of od of the Aetna that loss is recovera- hereunder,” triggering duty loss to no- when question ble. We turn of insurer, tify as the moment when the loss was discovered. a possible insured learns of loss: Discovery occurs when insured be- OF LOSS DISCOVERY comes aware of facts which would cause argues that Aetna Home’s loss person a reasonable to assume a was discovered before the Aetna bond went loss covered has been or will bond and, therefore, into effect does not fall though be incurred even the exact coverage period within the of the bond. or of amount details loss not be then provisions argu relevant this to the of actu- known. Notice insured an Agree “Insuring ment are found potential party al or claim a third ments” and “Conditions and Limitations” alleges which that the Insured liable is portions of the bond. circumstances, which, true, under preamble Insuring Agree- to the would create a loss this con- ments states the bond cover will “loss discovery. stitutes such at any sustained the Insured time but The bond a “discovery is therefore during discovered the Bond Period....” bond,” promises compensate agreements insuring define the losses for insured losses are discovered with- Among that are covered under the bond. period, regardless the effective bond of the covered are those losses related to em- actually when those losses occur. One fidelity. ployee compensable loss, fidelity ais Through bond rider number 6041 two, causally joined which consists of ele- insuring agreements, fidelity a loss is de- (1) (2) employee dishonesty; ments: resulting directly fined as from one “[l]oss loss. As condition for of a or more dishonest or fraudulent acts loss, fidelity promptly must the insured Employee, anywhere committed and wheth- notify upon learning the insurer er committed alone or collusion with possibility sustained, it has will or ” others.... “Dishonest fraudulent sustain, such a loss. are further acts” defined as those commit- (a) ted “with the manifest intent: to cause argues definition of loss; (b) the insured to sustain such “discovery” given in applicable rider obtain financial Employ- benefit notice, duty prompt to the insured’s also ee....”8 fidelity controls when a and, therefore, Coverage all is types discovered whether losses defined effect, insuring agreements compensable expressly under the bond. subject compliance argument insured’s the Aetna's is that “loss” ele portion “Conditions and Limitations” ment loss is to construed as “possible Section four of the Conditions and loss.” jury process- employee dishonesty, 8. The found that Glad’s conduct in and Aetna does not ing challenge finding appeal. AFCO investor loans met this definition

353 purpose discovered for the of numerous events that points to Aetna discovery of pur- time it is discovered for well have constituted same may purpose insurer, is, of the bond’s fidelity pose notifying for the that loss of when events include requirement. These notice possibility of the loss becomes known. 1982 letter to Home February Affleck’s possibility If of Aetna is correct irregularities in the AFCO in- relating the fidelity Home’s loss was discovered before closely by followed processing, loan vestor effect, the Aetna went Aetna into loans; well-publi- in delinquencies those required compensate cannot be March bankruptcy petition of cized AFCO for that loss. Aetna cites a number of complaints 1982; by the service of involving discovery cases similar in bonds beginning in against Home AFCO investors support of its contention. complaints April 1982. The AFCO investor The bulk of the cases cited Aetna deal alleged particular they note that are arguments with that the insureds had mishandling of the investor loans requirements prompt breached the notice ultimately judg- resulted similar to Aetna various bonds Home, and, such, may ment Bank, 593 See Perkins v. Clinton State met an actual have the “notice ... of or (8th Cir.1979); Deposit 327 F.2d Federal potential discovery ap- claim” definition of Corp. Casualty Ins. v. Aetna & Sur. duty. plicable prompt Home’s notice (5th Cir.1970); 426 Corp., F.2d 729 Alfalfa the Aet- AHthese events occurred before Co., Coop., v. Elec. Inc. Travelers Indemn. Argu- 1982. na bond was issued June (W.D.Okla.1973); F.Supp. 376 901 Nation- alerted Home to ably, many of these events Ins. al Newark Essex Bank v. American & possibility of a loss to Glad’s dis- due 64, (1978). Co., Be- 76 N.J. 385 A.2d 1216 Therefore, honesty.9 Home’s failure no- appeal not arguing cause Aetna is on that possible fidelity loss until tify Aetna of duty, prompt Home breached its notice 9, nearly December six months after 1982— appeal. to its these cases are not useful issued, and ten months persuaded by We other author- are also pro- problems loan after investor Aetna, ity which, cited some of never- cessing light arguably came to — theless, warrant closer attention. prompt been a breach of the bond’s notice requirement. first examine those cases cited We Aetna, which, focus they because on Aetna, however, argue does not employee of when the prompt requirement by breach notice discovered, proceeded on element was all prevent recovery Home should assumption element of the loss trial bond. The court held actually loss had both occurred and could not be denied breach dis- been discovered before prompt requirement notice because Aetna honesty discovered.10 First element was prejudiced to show that it was failed Fidelity v. Bank Bowie & Casu- challenge Aetna does not Nat’l. such breach. (5th York, New 634 F.2d 1000 holding appeal. argument alty Aetna’s Co. Cir.1981); Bank, Empire 448 F.2d its that a loss is limited to contention State 336, Cal.App.3d Corp., 171 v. Sur. 115 9. Aetna also cites the revelation Glad’s loan National 393, (1981) (discussed fully Cal.Rptr. kickback in December 1981 as information that more 398 "possi- sparked duty notify Aetna of a 11) "estab and its reference in footnote however, jury, loss." As found ble by the record.” See lished Pacific-Southern Glad dishon- December 1981 Am., Mortgage Co. Co. N. Trust v. Insurance activities unrelated the losses est involved Cal.Rptr. Cal.App.3d 212 758 eventually incurred via the AFCOinvestor loans. (1985) analyze (criticizing USLIFE’s failure to fraud). occurred at same time as whether loss assumption This is somewhat troublesome in Empire Fidelity v. State United States & Guar. Fleming Maryland Casualty First Nat'l Bank of Cir.1971) Bank, (8th at least estab 448 F.2d 360 (Colo. Colo.App. 581 P.2d recitation of the loss, lishes fact its "probable” App.1978), in that it refers to repossession liqui insured’s exercise of analysis explanation. A similar without problem remedy upon Savings its borrower's default. Ass’n. dation exists in USLJFE Loan 360; P.2d Fleming, might 744. With dis- condition which insured covery given, itself thus the subjected against loss to a claim which it question employee dishonesty of the when indemnified the Bond.” 634 F.2d at element was discovered was determinative disputed The provision 1004. in the Bowie itself, fidelity of when loss the was discov- however, provision.” was a “loss not ered.11 Rather, provision it was a indemnifying the legal for insured incurred in costs defend- The of af- insurer’s denial ing which, proven, itself claims appeal. firmed on The court that the noted Bowie, would create a loss. In covered the employee improprieties that known were were, by successfully the issued them- insured defended seven before bond was suits selves, claims, dishonest fraudulent. that contained such prevent- thus rejected court the insured’s contention that ing sought recoup a covered loss. It improprieties it did not know the amounted expenditures legal these defense under the learned, during to the until cost provision. indemnification The court period, allegation. the bond of kickback to limit coverage provi- refused under that USLIFE, Cal.Rptr. According- at 398. 171 sion in those situations which the ly, the employee dishonesty element of the insured lost such a suit. Id. at 1005. fidelity been losses had discovered before properly Bowie equated court dis- commenced, period bond the and the losses of covery purpose legal loss for the of cost not were covered under the bond. Id. The discovery indemnification with possible effect, held, court seems to have also loss, covered rather than actual loss. How- alleged that the oc- kickbacks never ever, discovery its statement of loss curred, apparently employees’ based on the possible also means discovery of loss for denying submission of affidavits kick- the purpose of loss was neither Therefore, in- backs. Id. at 396-97. holding supported central to its nor presented during sured had “no new facts” Accordingly, cases cited.12 we do not find period bond to show that its loss persuasive support that statement of Aet- by employee caused dishonesty. id. at See position na’s here. 398. Fleming, bank Bowie insured determined discovery states loss would, meaning “within the loan it provisions had made “in all par- probability,” loss, of the Bond when the insured result in a virtue of [occurs] ty discovers sufficient facts to create a “delinquent sporadic” borrower’s Sav., insured, Cal.Rptr. 11. But see USLIFE 171 which known became to the in- adopted implicitly fidelity coverage which question before the bond in came into sured interpretation single urged here impropriety alleged Aetna. did this A It effect. additional — prompt employees requirement reference to notice kickbacks involved —came there, light question appears of the bond after the which bond’s effective date. The in- sought recovery fidelity identical to that sured Aetna bond. 171 for losses Cal.Rptr. Apparently, 398. US- "discovery pur- LIFE did not define for loss” poses requirement of the notice as does the cases cited dealt with loss in the context here; however, ap- bond in timely the court provisions, e.g., Deposit notice Federal plied a case law-derived definition similar to the Corp., 426 F.2d Ins. Mount Vernon Bank & person” "reasonable standard Co., of the Aetna bond Casualty Co. v. Trust & Sur. Aetna, requirement. notice Like the insurer in (E.D.Va.1963), F.Supp. 666 and in the context of argued fidelity USLIFE legal expenses, e.g., Fidelity indemnification compensation sought was not discovered Republic Loan Assoc. Sav. & Ins. 513 F.2d period. within the (9th Cir.1975), bond’s effective Like Flem- Corp. National Sur. v. First however, ing, Midland, the issue USLIFEwas when (Tex. Nat'l Bank S.W.2d discovered, the losses were 1968). themselves rath- regards but legal expense coverage, As employee er when the dishonest conduct that provision for such in the Bowie fidelity made them losses was discovered. That requirement, bond contained its own notice un improper pro- conduct consisted obligated student loan prompt der which insured was cessing, including appli- comply notify ly any legal failure proceedings the insurer of successful, regulations, granting cable federal the loans to that if would establish a loss within students, ineligible hiding coverage provisions. such acts from the loss 634 F.2d at 1002. effect, suspicions The loan into but were not 581 P.2d at 745. repayments. employ- possible by a until made bank confirmed the insured uncovered fur- had been in fraudu- evidence, aided the borrower ee who had ther went into after application. loan lently preparing the effect. The deferred to the trial court information, However, constituting the finding court’s dishonesty element employee dishonesty causing the insured’s loss, year until over was not discovered suspicions loss occurred when were Therefore, had the bond terminated. after confirmed, suspicions and not when the fidelity loss outside the the was discovered originally brought arose. This Id. period, and no on bond’s effective discovery fidelity of the the loss within the Id. the bond was allowed. coverage period. bond’s equates “loss” with Fleming implicitly Empire Fleming State Bank dem- purpose fidelity of “possible loss” the a to onstrate that determination as when the in coverage only inasmuch as loss dishonesty of a employee the element fidel- may positively sured’s loss not have been ity relatively is a loss is discovered diffi- established, “probable” deemed but cult, subjective particularly one. This is however, period. Fleming, within the bond where, Bank, Empire true as in a State on the was discov does not turn when loss suspi- must made between a distinction be ered, employee dishonesty but on when the exists, cion and confirma- that element it While that caused was discovered. suspicion.13 tion that Where reasonable details, sparse appears it on Fleming people disagree suspicion could as when knowledge the neither nor that insured had discovery, into ripens appropriate thus it is suspicion employee dishonesty the that defer to fact finder’s determination well the bond caused its loss until after discovery employee as to of the dis- when Therefore, even if the loss terminated. honesty fidelity element of a loss occurs. peri discovered within the bond itself was determination, appropri- it is To aid in this od, identity fidelity of that loss as a apply ate similar to those standards loss not discovered until later. was requirements. The found in notice fact Empire Bank dealt with losses State inquire finder into when a can should it by an bank after had sustained insured position person in the insured’s reasonable securing liquidated collateral certain loans concluded, i.e., discovered, would had which the borrowers defaulted. As been the employee dishonest conduct had Fleming, employee occurred in an a cause of loss.14 dishonestly the loans to insured had caused however, process- Here, dishonest Glad’s Again, although framed as a be made. ing of investor loans was discov- the AFCO discovered, when loss question of loss ered before the actual result- Home dispute actually Empire State Bank ing Pos- from those loans established. employee discovery concerned sibly, dishonest conduct was discover- fidelity dishonesty element of loss. went into ef- ed before the Aetna bond suspicions to the dis- The insured as However, discovery honesty went fect.15 Glad’s before the bond USLIFE, according employee's perceived Cal.App.3d to an trustwor- 13. See also Cal.Rptr. 393. thiness. employee 14. Courts have noted when dishonesty present claim that Glad’s 15.Aetna’s trust, ably position in a dis- has served bond became was discovered before Aetna covery employee’s comes of that position appears inconsistent with the effective See, e.g., Bldg. employer. Perpetual hard to the exchange of with it in its letters Home took Fidelity & Guar. & Loan Ass'n United States regarding lawsuit. defense (1902) N.W. 118 Iowa possible fidelity of a loss Home notified Aetna (“The ordinarily years is not shat- confidence of 1982, during arising from the suit in December Bank, ...”); Empire State tered in an instant period of the Aetna inform- effective highlights difficulty 448 F.2d at 366. This ing discovery pretrial had revealed Aetna pinpointing the dishon- time when discovered, possible employ- conduct fidelity fraudulent esty of a loss is element may vary respect rapidity discovery ees to the AFCO investor loans. that the of such itself, dishonesty, by actually and whenever that tain the result now seeks. As occurred, drafted, however, dis- did not constitute Aetna bond does not remaining fidelity covery loss: limit coverage accomplished the fashion element, i.e., loss, necessary remained by the Royal Clay Trust and bonds. actually oc- be discovered. Until that We accept cannot Aetna’s contention that curred, Home had no claim under the bond. the loss element of a loss means court, succinctly put As the trial loss, possible possible A loss. no matter loss, dishonesty. covers likely closely how and no how matter tied in two We further note cases employee dishonesty, compen- is no more sought by which outcome under the is employee sable bond than dis- obtained, bonds standing Indeed, honesty possible alone. question indicated a clear intent to define all, out turn no loss at loss, possible in terms of when available. Just loss, rather than actual was discovered. employee dishonesty element must be dis- subject The in Royal bonds Trust Bank v. beyond suspicion covered mere to create a Co., 788 719 Nat’l Union Fire Ins. F.2d loss, fidelity so must the loss element be (11th Cir.1986), and Home Ins. Co. v. Life established, merely pos- and not be deemed Clay, Kan.App.2d 13 773 P.2d 666 sense, sible. It makes no without bond (1989),each provi- contained a section four intent, language clearly indicating such an substantially sion that differs from section coverage define the to the bond’s dis- four of Home’s Aetna bond. Section four covery that, themselves, of in events are of Royal Clay the Trust and bonds each not covered. provided: fact, existing language In the indi- bond applies bond to This loss discovered contrary preamble’s cates a intent. during period. the Insured the Dis- bond promise of indemnification for “loss sus- covery occurs the Insured when becomes insured,” tained the indicates it is that of aware facts which would cause a rea- loss, loss, possible an actual not a that person sonable to assume that a loss fidelity loss of satisfies the element a loss. bond been covered has or will be Accordingly, whenever Home discovered incurred, though even the exact amount Glad’s dishonest involvement in the AFCO may or details of then loss not be known. loans, investor it still had to discover an Trust, 720; Royal F.2d at 773 Clay, complete actual loss in order to dis- language clearly P.2d at 676. This ties covery of a If Home made loss. loss, discovery possible to of be- discovery within period the effective of of given cause the definition is bond, recovery the Aetna loss un- applicability, context the bonds’ rath- der due. er require- than context of notice Mortgage In contrast, Trust here, In ments. at issue Pacific-Southern Am., v.Co. Insurance Co. N. 166 Cal. by promising coverage for “sustained” (1985), loss, App.3d Cal.Rptr. indicates that turns on actu- al, Appeals California Court of noted that in possible Royal rather than losses.16 the case of loan Clay applications, Trust and are instructive as to how fraudulent might necessarily Aetna have drafted its bond ob- at to loss would not occur Responding September to Home’s notice in was known before the bond went into force. Aetna declined to assume defense concluded, Armitage contrary suit. Aetna Royal 16. Trust also indicates that the bond in assessment, Home's claims provided, there contained rider that fraud, and, employee were unrelated to there- liability respect any "there shall no fore, succeeded, they would not create a cov- arising claim ... out of circumstance or effect, ered loss under the Aetna as- prior Assured to the occurrence known inception serted that Home not discovered em- disclosed Under- hereof not ployee dishonesty at a time when the Aetna inception.” writers at 788 F.2d year. bond had been force for over one Aetna bond contains no limit- similar however, Now, argues ing coverage. fraud, itself, might requirement not the definition of dis- not as the same time rider, in its covery all: found forms condi- occur at there tion that must be met. Nor is evi- loan made case a secured [I]n discovery appli- misrepresenta- dence that definition fraudulent because tions, requirement not nec- fraud and loss do cable to the notice intended same time. essarily insuring agreements. occur at the apply bond’s later not at all may occur much relationship aspects Two of the no- eventually become debtor since the tice belie such intent. rider the bond property creditworthy underlying or the First, the rider itself indicates it is may appreciate in value so that actual intended “to revise sections 12 and 4” of suffered. is ever bond, “Rights after Termination” (emphasis original). Cal.Rptr. at 757 requirement, respectively. and the notice The situation described Pacific-South- “discovery” If the definition contained in is much like the situation Mortgage ern apply were the rider intended to presented pro- here. The dishonest loan everywhere appears in the term immediately cause cessing Glad did the rider should not have labeled as been loss, possi- only possible loss. but and four. revising sections twelve larger with the news that ble loss loomed Second, section one of conditions and resisting repay- investors were APCO specifical- portion of the bond is limitations loans, resistance, ment of their but this “Definitions,” gives ly entitled and certain legal developed it into action even when meanings apply throughout the terms Home, not to still did amount an “discovery” If the definition of only actual actual loss arose loss. The apply the rider to found in notice were jury and Armitage when the verdict subse- bond, rider, again, the once throughout the quent judgment Home from recov- barred applica- should have been made could and actual, ering outlays the loans. This its on one, simply ble section instead of to to loss, by already- if caused sustained even do twelve and four. We not as- sections dishonesty, known was the event dissenting of cribe to the assertion our that had to be discovered within the effec- “average colleague, purchaser” of the period tive of the bond for to fidelity readily assume that bond would apply. Armitage jury Because verdict the constituting in a definitional rider during judgment and were rendered the only procedural provision apply would to period effective of the Aetna Home’s contract, the no matter what the entire discovered, loss both sustained and context. discovery fidelity completing period.17 loss, during the bond Additionally, application of a different “discovery” regard of with to the definition preamble Aetna also relies on notice, opposed duty prompt insured’s insuring agreements, which makes cover- insuring defining losses in the covered age subject compliance the bond’s with agreements, disharmony of Limitations, does not cause including and Conditions is language, consistent with bond requirement, support argu- notice its purposes provisions those are different “discovery ment that of loss” means “dis- insuring loss,” agree- to serve. covery possible throughout intended identify types of for which persuaded. are ments losses bond. We not notice Furthermore, argues discovery. incorrectly Aetna did that under our affect that 17. The dissent argued appeal argue reasoning, only not and has not a loss sustained when actual trial is discovery damages precisely of loss occurred are determined. The trial that the after argument Any coverage. would be con- that a Home on court held loss sustained 1984, 14, August jury trary "uncontroverted facts” in- verdict to one when order, rendered, parties’ stipulated pretrial period. in the well within the bond Such cluded ex- liability stating under the bond was for acts of a that through August verdict established Home’s dissent, and, therefore, employee, its dishonest dis- tended therefore, argues properly Subsequent issue not before covery determi- an of a sustained. us. nation of the exact amount of the loss did not omissions, Misrepresentations, reflect compensation provided, will be conceal- facts, ment and incorrect statements “possible with losses.” no concern application] shall insurance not [in however, provisions, properly- are Notice policy prevent under the or possible actual concerned with both contract unless: purpose of a notice of loss loss. “[T]he (a) fraudulent; or provision opportu- is to allow insurer an (b) acceptance material either pro- nity investigation and to to commence risk, or to hazard assumed tect interests.” Newark and National insurer; or Co., Essex v. American Ins. 76 N.J. Bank (c) good the insurer in faith either would (1978). Among the 385 A.2d the policy issued or contract protected is interests the interest ..., or provided coverage would not have preventing occurring. a covered loss from respect resulting to the hazard interest Critical to furtherance loss, the true facts had been made prompt notice to the insurer when the required known to the insurer as either possibility of a covered loss becomes application policy con- Therefore, known. in the context of a no- tract or otherwise. provision, quite appropriate tice correctly notes that subsections discovery define of loss as (a), (c) (b), disjunctively, by are listed possible loss. “or,” the word so the satisfaction of light foregoing, we hold that one prevent recovery subsection can discovered, loss was for the the policy. Berger v. Minnesota purpose determining coverage, not when (Utah Mut. Ins. 723 P.2d Life known, possibility of loss but became 1986). jury, by special interroga- Here the when was established final tories, application found judgment case. There- unintentionally misrepresented Home had fore, any discovery, before Aetna bond or omitted facts that were to material effect, possibility went into of that assumed, to be risk and that had those loss, prevent being does not the loss from disclosed, been facts Aetna would have ei- covered under bond. ther not issued the bond or excluded cover- age consequences for the of Glad’s dishon- Therefore, esty. prov- not while fraud was MISREPRESENTATION IN en, the “materiality” and “would not have BOND APPLICATION provided coverage” denying bases for re- coverage Aetna also argues that covery were under established the statute’s for in question the loss should be barred (b) (c).19 subsections because Home failed to reveal dis Glad’s application question The bond in is a problems honesty growing and the form by standard furnished Aetna. loans, including pending AFCO investor Among other inquiries, appli- it asks the lawsuits, applied when it for the Aetna employees cant to list to be covered bond, and to list “all losses sustained ... argument Aetna’s upon is based Utah during respond- the last years.” six Home 31-19-8(1) (1974), Code Ann. which was truthfully inquiries. § ed to these Glad was applied effect at the time Home among employees not be listed to cover- reads, provision bond.18 That in relevant long-departed ed he because part: application completed. Home when the replaced requirements statutory Section 31-19-8 was Code Utah denial not, Ann. § 31A-21-105 in 1986. had not been met. We do how- ever, ruling, analysis address the court's as our subsequently 19. The court trial ruled that there focuses on the fact that the omitted material competent was insufficient evidence to establish requested ap- information not provided coverage" the tive, not “would alterna- plication. (b) reading (c) subsections conjunctive, disjunctive, rather than held

359 argues that application Bank Sumitomo Nothing Iwasaki, to 70 suggests employees former are be v. Cal.2d 73 California (1968), listed; Cal.Rptr. 447 additionally, an Aetna underwriter P.2d 956 Phoenix Loan, v. application Casualty not re- Inc. Aetna that the does Sav. & testified Co., (D.Md.1966), Responding F.Supp. 465 listing.20 the Sur. quire such sustained, report- West Am. Fin. Co. Indem. query about losses Pacific (1936), Cal.App.2d 61 P.2d were “none over deductible es- ed there response duty the part a truthful tablish a on of an insurance amount.” This was get- applicant to not just lawsuit was volunteer information re- since the yet ting quested application. As noted way under and Home had court, clearly trial any actual loss from it. Nor none those cases ad- sustained duty inquiries, by any reason- dresses such a in the context of were other application, reading the bond an- whether not the insurer had ever re- able quested question. the information in incorrectly Home. How- swered ever, dictum, notes “an abso- Sumitomo The omitted material information com- upon duty obligee lute to volunteer gen- by Aetna concerned plained of Glad’s materially affecting disclosure all facts he had eral which been —for surety risk bond.” problems fired—and the known with the Cal-Rptr. P.2d at 960.21 To loans, including AFCO investor the law- suggests the extent that Sumitomo that a however, application, suits. The bond duty surety applicant insurance has inquiry perceived no that could be makes inquiry disclose facts about no is requiring this information. Aetna’s ar- made, we decline follow that case.22 then, gument, is Home nevertheless duty had a this information in We the rule stated in volunteer believe Couch process, “It application appropriate: duty and that fail- more is an insurer’s facts, misrepre- nothing ure to do so was an omission or to ascertain the and if concealed, permits inquiries, sentation that denial of and it makes it 31-19-8(1). complain We find the au- cannot that the situation was not section supposed proposition thorities cited Aetna for what it to be.” 9 Couch on (1985). general unpersuasive. 2d 38:72 This Insurance § "employees 20. Because the certification lists ... did not address of whether an covered,” among duty to be and Glad is not listed applicant insurance has an initial vol- arguable employees, these it is that he was nev- unrequested during ap- unteer information However, er under the bond. whether covered plication process. particular fidelity employee a application, is on a listed bond possible importance, is while of not America, v. Combined Ins. Co. 16 22. Wootton of dispositive coverage; par- as to the issue is the 52, (1964), P.2d Utah Utah 2d 395 724 Banshares, Hays ties’ First Inc. v. Kansas intent. directed on this case to which we have been issue, 576, 1184, Co., Sur. 244 Kan. P.2d Bankers 769 urged suggests contrary result to a that (1989). appli- 1190 We find no indication in the Wootton, supreme our held Aetna. In court that itself, cation, the bond nor other evidence in the to on the failure volunteer certain information coverage that was to restricted record be reasonably application an "cannot be insurance exclusively by employees to caused those listed upon to as sufficient evidence considered existed, application. on If such intent we finding a of intent to defraud." 395 P.2d at base expect Aetna would the insured to inform of misrepresentation Because intentional change every personnel keep fidelity to in order Wootton, the issue in and because omit was likely Since is such current. it during ted in that case was not material to changes period information will occur the bond instruction, sought, appear no such it does not for which there is that risk is present list intended to be exclu- not on all fours with case. case is note, however, sive. that the insurer The court did inquire to about the omitted informa had failed fidelity 21. Sumitomo did not involve a risk, tion, being possible despite a aware of bond,” guaranteeing repayment but “creditor a permitted to thus the insurer could not of loans. The case involved ascertaining truth and "blind itself from continuing duty whether the insured had a to misrepresentation in order then claim wilful ... adverse material information discover- disclose ed payment policy." a Id. to avoid during contract. course the insurance 566, Cal.Rptr. at 447 73 P.2d at 958. It therefore applicable to TRADING properly is bonds. EXCLUSION rule See, Fidelity Guar. e.g., States United appeal argument fourth Aetna’s on Howard, (5th Cir. 67 F.2d v.Co. from trad Home’s loss resulted 1933); v. United Pac. Ins. State securities, ing and that loss is there (1980). Wash.App. 612 P.2d excluded from under rider fore allocation, insurer, expert in risk The portion 6030a the bond.25 The relevant upon questions it can be relied to ask rider 6030a states: deciding ap to material to whether deems The Underwriter shall not be liable under As our policy application. noted in prove any resulting the attached applied recitation of the standard review directly indirectly trading, or from with problems arising applications, to insurance Insured, knowledge without the or clearly to make from an insurer’s failure otherwise, in the name of the or Insured inquiries the insurer. A relevant rest with represented by any not in- whether or effect, would, contrary require an rule due debtedness or balance shown to be con applicant affirmatively insurance to account, any Insured on customer’s applied-for an not vince insurer to issue fictitious, notwithstanding actual or policy.23 part any act or omission on the Employee with in connection account We also that it would have been a note indebtedness, relating trading, to such simple in- matter include balance. quiries application designed reveal the omitted material information. parties agree “trading” in rider The Simple questions could have been drafted “trading 6030a means in securities.” Ac- employees and regarding dishonest former cord, Express, Shear son/American Inc. pendency of lawsuits or other circum- Bank, P.Supp. First Continental might stances that cause a covered loss.24 (W.D.Mo.1984)(because 1310-12 exclusion dissenting Contrary opinion, dowe adopted from stockbrokers’ blanket ignore prohibition statutory of bond, “trading” trading term refers insureds, omissions but construe securities). whether, dispute as a ques- require that the insured answer all law, matter of on the AFCO losses posed omitting application, tions no trading resulted in se- investor loans requested responses. The ratio- dissent’s curities. require spec- applicant nale would verdict in- endlessly ulate about information the finding based that Home had been want, might sured reasonable purpose prov- seller of securities for the limiting speculation. means of 12(2) ing section violations of the Securi- 61-l-22(l)(a) Because Act of the omitted material information ties 1933 and of section Act, application, for in was not asked the bond of the Utah Uniform Securities Utah (1989). intentionally and because Home did not Ann. 61-1-1 -30 Code §§ Aetna, from promissory withhold that information we securities involved were the that the hold bond cannot notes the received from AFCO investors denied Utah Ann. in be under former Code AFCO return for their investments.26 31-19-8. funds to used make those investments § brief, question, We note in its that Aetna characterizes bonding company" tion in Aetna has added a "lur[ing] as Home new pending application. about lawsuits to its bond insuring anticipated possible This into the loss. is not the characterization well-taken because trading argument 25. Aetna’s exclusion approached that evidence shows Aetna Home presented trial in a for the court motion suggestion replace expir- the with ing Home the summary judgment, denied. which was Any F & Aetna D bond with an then, luring, appears to have been initiated jury Armitage 26. The was also instructed that attempt in Aetna to secure Home’s business. the the trust deeds received Home to secure were 24. The Aetna testified trial AFCO investor loans not securities. underwriter who at that, subsequent applica- the indicated 1982

361 gaged speculation in mortgage loans securities while false- from the second came representing ly doing Home's that he was so on to the investors. sta- Home made F.Supp. of from the behalf of the insured. 579 at tus as a seller securities arose loans, pur- 1307-08. Sutro & Co. grant Indemnity without which Bros. v. of Am., F.Supp. Ins. N. 264 promissory notes would Co. 273 chase of AFCO of (S.D.N.Y.1967) involved an insured stock- not have occurred. resulting acceptance broker’s loss from its also jury Armitage case found checks, bounced, of noncertified which then in engaged fraudulent con- in it payment securities sold. Id. at purchase duct in connection with the or cases, trading 280. In both exclusion security, sale and had therefore violat- of recovery by barred the insureds on their 10(b) Exchange ed section of Securities surety bonds. promulgated Act and Rule 10b-5 act. Express under that Shearson/American Sutro Bros, ownership involved actual interests The trial court held Home’s conduct in or traded securities insured an in connection sales and its with securities employee. The insured’s losses suffered pur- status as a seller of securities for indirect, they insureds in that were pose acts did of the securities violations not did not result from the own secu- insured’s compel a conclusion that had traded secu- speculation, rities from unauthorized but meaning rities rider 6030a within speculation by an insured’s points trading exclusion. Aetna out that receipt improper from payment rider losses re- 6030a excludes ” securities, from rather than market losses “directly sulting indirectly from trad- history suffered insureds. The ing in securities. Because Home was indi- exclusion, trading in related Shear- rectly trading by involved securities vir- Express, son/American indicates that it is investors, tue of its loans to AFCO resulting intended to exclude losses from argues trading exclusion insured’s, employee’s, or the insured’s understanding applies. Based our actual It does investment securities. exclusion, purpose trading we an resulting indicate that losses from in- disagree. are to sured’s customers’ investments Express relates Shearson/American excluded. history trading exclusion bonds trading Other courts have held that the issued to financial institutions. exclu- applies only exclusion insured’s mar adopted sion from stockbrokers’ bonds ket losses securities stem transactions in the 1970s because financial institutions ming from market fluctuations. See First becoming increasingly were involved se- Deposit Fidelity v. trading, higher Federal Sav. & Loan presents curities (6th Maryland, F.2d 260-61 Co. risks than the usual business of these insti- Cir.1990); Insurers, believing Co. Am. the extra Insurance Gi tutions. of N. Inc., (9th bralco, trading 847 F.2d Cir. risks involved in securities could 1988). Here, charging higher pre- not be insured without the securities market losses customers, miums, adopted trading exclusion loan accrued arose eliminate such risks standard cover- AFCO investors. Home’s loss age. F.Supp. (citing Digest when disappointed those investors were Insurance, (3d 1977)). repay obligation their Bank ed. able to avoid funds, a result of the invested authority Aetna cites two cases as judgment. trading the proposition the that exclusion applies holding the points where the insured does no more Aetna to no case trad- ing money apply than to a to the insured lend customer who then exclusion where an money acquire arguable uses that to invest in did not at least owner- securities. case, however, Here, supports ship in Home propo- Neither the interest securities. estate, Express acquired in- an in real sition. Shearson/American interest employee whose the deeds the investors’ volved an insured en- trust on AFCO such, assuming ny alleged mismanagement As Home was a about Home’s homes. institution, lending of a not the in judgment routine risk and bad with connection speculation high risk securities to which argued AFCO loans.27 Aetna investor trading exclusion is directed. strenuously mismanagement poor that and judgment, employee dishonesty, not caused ap- a expresses also sound Gibralco loan AFCO investor fiasco. proach trading when em- to exclusion fidelity implicated: ployee coverage is upon It incumbent trial court agree not that We do insurer] [the jury to parties’ instruct the on both theo trading precludes cov- exclusion case, long competent ries of so as evi erage anywhere a if trade occurs presented support dence has been resulting chain of events a loss to the those Bldg. theories. Powers v. Gene’s applicability insured. broad Materials, Inc., (Utah 567 P.2d urged by trading loss exclusion in- [the 1977); Irey, Chromalox Div. Pacific would eviscerate the dis- surer] (Utah App.1990). P.2d Utah coverage provisions honesty of the Bond permits appellate R.Civ.P. 51 review of might every case where occur in trade jury upon timely, specific instructions ob employee's the course of an dishonest jection, appellate or at court’s discre scheme. tion: 847 F.2d at 533. party may assign No giving as error the Here, dishonest was the Glad’s conduct give or to the failure an instruction un- ultimate cause Home’s loss. Glad’s con- objects objecting less he thereto. In to however, duct, representation included no instruction, giving party an must that Glad or engaging either Home was distinctly state to matter which he trading in securities a manner that objects grounds objection. and for his trading discourage. exclusion is to intended Notwithstanding require- the foregoing coverage Aetna bond’s ment, court, appellate in its discretion expansive should not be defeated an justice, may and in the interests of re- interpretation trading exclusion. giving give view the of or to failure Therefore, we hold that loss is Home’s instruction. trading excluded from ex- Under Rule we first examine clusion. jury claimed instruction to errors objected Aetna in the trial court.

JURY INSTRUCTIONS objected Aetna num argument appeal fifth instruction Aetna’s is that substance, ber given jury twenty-nine. improper- instructions instruction ly twenty-nine jury jury any negli failed allow told the to consider that gent mismanagement poor prevent Home’s and failure own Glad’s judgment business as the cause its loss. dishonest conduct was not a defense to trial, At Aetna elicited voluminous testimo- We bond.28 do not argument point appeal, jury 27. Much of Aetna’s on this we do not consider instruction er- argument theory. devoted to its rors related that apportion- "equitable under the under an Instruction 29 reads: theory, according ment" should be reduced portion by mismanage- negligence the ment, of its resulting loss caused You are instructed that opposed dishonesty. policies inadequate to Glad's from the existence of jury propose allowing procedures Savings, did instruction at Home or the failure to apportionment, policies procedures place but the court trial refused to follow then in give object Savings, did not instruction. Aetna at Home is not a defense available to jury, to so refusal instruct the nor does it Aetna if the conclusion drawn therefrom is appeal procedures refusal policies now. Nor does Aetna’s an- better or adher- stipulated complaint, pre- swer to Home's ence would thereto have checked the dishon- action, anything esty, prevented any, Larry trial order in this else Glad directed, record we to which have been indicate loss that would otherwise have occurred. A presented apportion- surety company liability Aetna otherwise is not released from Therefore, theory prudence ordinary ment trial court. of on the absence even on

3Q3 from the dishonest or fraudulent appeal to be re- sulted point on perceive Aetna’s acts, prevent any, Larry if of Glad. A direct to failure to Glad’s lated Home’s rather, alleged it to sequence is related dishonesty; requires result connected be- poor mismanagement and business general and Larry tween act of Glad the loss approving AFCO investor judgment ultimately you If find occurred. twenty- of The thrust instruction loans.29 contributing primary that a cause to the nine, however, Home’s failure is limited to failure Home’s loss was the [sic] conduct. So prevent Glad’s dishonest to Savings Home officers and directors of limited, states the properly instruction compliance appropriate require to with that, specific general rule absent procedures, and lending practices and neg- contrary, insured’s provision to the an primary failure cause prevent employee dishon- ligent failure to loss, then loss was not the its fidelity loss cover- esty is not a defense to result of or fraudulent direct dishonest 2d 46:233 age. on Insurance Couch § acts, any. if Banshares, (1982); Inc. v. Hayes First theory Home’s losses were Aetna’s Co., 244 Kan. Sur. Kansas Bankers mismanagement poor caused and busi- (1989). Instruction 769 P.2d presented judgment jury ness to gener- twenty-nine properly limited Aetna’s one, twenty provided instruction to mismanagement argument misman- al part: also claims ... that the inde- “Aetna conduct, and, agement unrelated Glad’s pendent and of Home Sav- acts decisions therefore, proper. ings’ management constituted cause of objected also trial twenty- Savings’ Home loss.” Instruction give proffered instruc court’s refusal its jury of Aetna’s similarly six advised the forty-two. two and rele tions number was caused view that as portions vant of those instructions read dishonesty: independent of factors Glad’s follows: a defense in this Aetna has asserted as [Proposed you If instruction no. two]: Savings sus- action that loss Home find the losses Home sustained litigation resulted tained Savings proximately solely were and - Glad, Larry not from the Savings’ own misman- caused Home directly sepa- from resulted but that agement, negli- other misfeasance or independent rate cause. and gence failure to follow safe and and/or defense, prevail For Aetna lending practices, you must sound then you prove instructed that Aetna must are coverage for Home find there is no Sav- an alternative cause of the existence of ings under the bond. loss, i.e.[,] separate Savings’ one [Proposed forty-two]: The instruction no. Larry dis- independent and Glad’s recognize only necessarily law does any. honesty, consisting injury, only one cause of factor, act, twenty-one together, instructions

one one or the conduct Taken contrary, apprised the only person. twenty-six adequately one To the and per- jury theory acts omissions two or more Aetna’s that Home’s loss concurrently-as by mismanagement sons work the effi- and bad was caused loss, conduct, independent cient of an event or judgment cause of Glad’s case, participating jury such a each of the find in favor invited regarded the law agreed theory. acts or omissions In- Aetna if it rejected by as a cause. forty-two, two and structions court, presented they case, to the extent the trial In this the bond allows and, theory, unnecessary; Savings’ directly re- the same were if Home judgment, lessening agement poor and char- part business the risk. insured in any provi- dealing testimony does The Aetna bond not contain with matters acterizes that sion this effect. dishonesty. to Glad’s unrelated brief, Aetna recites much of the testi- mony alleged it used to show Home’s misman- they presented theory the same in a cial approved by verdict form the court. fashion, longer confusing they and more specific The trial request court’s for on the Therefore, it were undesirable. was not objections, record Aetna’s awareness of the error, having given twenty-one instructions alleged verdict arising form deficiencies give twenty-six, refuse instruc- discussions, from earlier off the record forty-two. tions two and Aetna’s central drafting involvement in special gave verdict form ample op- Aetna jury We now turn to instruction portunity preserve it, objections to on arguments presented appeal on that were record, in the trial court. The failure made the trial court. Aetna asks us to avail itself opportunity of that relieves discretion, permitted to exercise our un any obligation us of to hear objec- those der Rule to entertain the merits of appeal. tions on King, See 739 P.2d at arguments appeal. these An appellant 621-22. making request such a must convince the

appellate court that the argu merits of its ment should King be heard. v. Fereday, OFFSET OF DAMAGES (Utah 1987). 739 P.2d argues next that Home’s Aetna general jury The instructions were loss on the principal AFCO investor loan special form, condensed into a verdict con $237,760.77, should be offset an amount sisting questions, of five jury which the says recouped Aetna on the loans.31 answered in Home’s argues favor. Aetna trial, parties Before agreed special defective, that the verdict form was jury would decide which of the loans question that one phrased in a man fell within the coverage, bond’s and that unfairly Home, ner that favored and anoth the trial court would then calculate Home’s er proposed by improp Aetna was However, accordingly. the factual erly special left out of the verdict form.30 question of whether the return of certain Our review of the record satisfies us that outlays loan to Home amounted to a re- proceed we need not to the merits of Aet- coupment was neither submitted to the argument. na’s The trial special court took jury nor reserved for the court. pains, light complexity case, of the of the parties’ $237,- to solicit Aetna’s specific objections characterization of the jury recoupment loans, 760.77 as a instructions. on the This was done on record, just thus a before the reduction of the loss case was sub- sustained Home, jury. mitted to the objections Unresolved not made until jury’s after the prior, off the record verdict on Aetna’s liability discussions was returned. preserved should have been at that time. characterization is based on an exhibit Aetna had proposed submitted its own spe- testimony jury, received but the cial verdict form to the trial jury court. Addi- apply never asked to this evidence tionally, acknowledges that its coun- to determine whether Aetna’s character- performed sel drafting the final spe- ization was factually Indeed, correct.32 we parties 30. have not indicated that we strenuously objects should 32.Home to Aetna's charac- arguments regarding special handle partial retprn verdict terization of the lays 1237,760.77 of the loan out- any differently jury loss, forms than arguing instructions un- as an offset of Home's that the apply loss, der Utah R.Civ.P. so we that rule and did not diminish that but sim- special ply its related argu- Although case law to the verdict averted other losses. we affirm here. ment the refused offset on the basis of Aetna’s failure jury, to submit the issue to the we note that jury thirty-four 31. thirty- determined that appears Home’s characterization to be correct. six AFCO investor loans had been caused appear It outlays does not loan dishonesty, brought Glad’s them repayment within returned to Home constituted debts, By of the Aetna bond. investors’ which would have reduced parties’ stipulation, Instead, the trial court totaled the Home's loss. Aetna’s exhibit reflects loans, principal thirty-four on those then sub- that the bulk of the returned loan funds was tracted the deductible applied under'the toward satisfaction of a debt 15000.00 owed di- calculating 1889,812.46. principal AFCO, recoverable lost rectly to total to Home toward the recission of two investor loans that did not become the by anything dishonesty, by in the record caused not Glad’s but directed to are not backdating ever an offset- indicating that Aetna made Elaine Reese’s dishonest argument jury. agreements. to the of-loss AFCO loan Be- investors’ cause of evidence that Reese backdated the court noted that while some trial direction, argu- documents at Glad’s this supported have Aetna’s the evidence unpersuasive. ment is also Aetna must finding fact argument, it could not make a $190,647.31 legal pay the fees that were evidence, Home had based on that where plaintiffs against Armitage awarded to the jury right its to the consid- not waived part Home these fees were the because fact, agree. "All questions er it. We by loss sustained Home as result of that by jury trial ... are to be where the lawsuit. to by jury, and all evidence is decided them, except when other- be addressed to defense costs As to Home’s Ar- Ann. provided.” wise Code 78-21- Utah § mitage, Agreement of the bond General C Therefore, (1987). Aetna is not entitled Home “court and indemnifies costs rea by damages sustained to offset attorneys’ sonable fees incurred ... on ac Home loans. AFCO investor loss, which, damage count of claim insured, if established would LEGAL FEES AND COSTS a valid collectible loss constitute and sus finally legal in- argues Aetna fees by tained the Insured under the terms of Armitage litigation Home in the curred argues Aetna this bond.” one of under should not be recoverable the bond. seven action in Armitage causes of (1) Legal categories: The fees fall into two represents a covered under Armitage plaintiffs fees incurred therefore, obligation under General Armitage to them under the awarded Agreement pared to C should be down one- $190,647.31;33 (2) amounting to judgment, total, i.e., $62,- stipulated seventh of the legal defending own costs Home’s disagree. 500.00. We litigation, $437,500.00.34 Armitage We court, As noted trial Aetna’s “one- consider them in order. overly mechanistic and seventh” formula is Regarding the fees awarded reflects examination of the actual alloca- plaintiffs, argues' first Armitage Aetna among attorney tion of time and effort they not covered under the bond be are Additionally, causes of action. Aet- seven they cause arose from violation of Home’s arguments, na’s turns on various formula laws, and thus federal state securities court, already rejected here and the trial trading are excluded under the ex bond’s that some of the seven causes of action are already clusion. Because we have deter arguments by not covered bond. These trading mined that the exclusion does cannot be resurrected to reduce fees loss, argu bar for Home’s Agreement due under General C. Next, argues ment Aetna fails. responsible Finally, stipulated acts for the total reasonable dishonest Armi- fees, $437,500.00, tage judgment against Home were was decided not ma- defense se, statutory, prohibi- rejected Aetna’s upon lum but malum after the trial court stipulation, within the formula. tum creatures not included “one-seventh” right coverage. argu “specifically Aetna to bond’s This reserve[d] Savings appeal ment fails because the bond lacks the issue whether fees, any attorneys’ Finally, distinction. ar it is is entitled gues owed no losses in were determined that Aetna obli- subject litigation, stipulated Home and and to certain refunds to 34. This amount legal expenses; AFCO. as Aetna Home’s total reasonable right appeal, does Aetna reserved by compromise 33. This amount was arrived at now, right any portion recover of this counsel, Armitage parties' one-half amount. originally sought by amount plaintiffs. od was not until

gation provide because it sustained after added.) period (Emphasis the effective Because we the bond. Bond.” obligated have determined that Aetna is The loss was not also covered because it bond, provide coverage ap- the under it fell within the exclusion found Section 11 that, pears stipulation, under the Aetna has Section 11 bond. excludes from right appeal any whether waived its employees previously all known attorney fees are due. to have committed a act. dishonest sum, legal In the fees awarded to the should from also be barred seek- plaintiffs against Home and Armitage the ing any recovery damages resulting for stipulated expended by amount Home in its Armitage from the lawsuit it did because litigation the are Armitage defense of both not, statute, required by as disclose its bond, the and are covered under to be claim, application pending Armitage the a by reimbursed Aetna. regarding material fact the hazard as- by sumed Aetna. CONCLUSION foregoing In view of the arguments, any reasons, foregoing For the the trial one dispositive, of which should be I dis- judgment in Savings court’s favor of Home opinion sent other without issues respects. is affirmed all majority excep- addressed tion of the offset issue. if Even the loss BILLINGS, J., concurs. bond, were majority covered remanding errs for case consid- BENCH, Presiding Judge (dissenting): offset damages eration of the issue since majority holds that is a there distinc- parties expressly reserved the is- phrase tion “discovery between of loss” damages sue of determination as it is used determine Damages trial court rather than jury. “discovery of trigger loss” as it used to simply may not be determined without ad- requirements. majority notice thereby dressing any claimed offset. adopts minority, novel, a totally a if not interpretation discovery bonds and de- I. CONTRACT INTERPRETATION . significant departure mands a from current majority misapplies ignores either industry practices. that, I believe following recognized rules contract bond, terms Aetna is not liable to interpretation. resulting Home for loss from the dis- honesty Armitage of Glad or the give lawsuit. “The cardinal rule is to effect to the Any coverage for arising parties, and, from possible, loss intentions of the glean lawsuit Armitage must be found under the those intentions from the contract G.G.A., F D Leventis, not the Home is itself.” Inc. v. 773 P.2d simply seeking 841, (Utah wrong App.1989). from the 845 also See LDS respectfully Co., insurer. I therefore Hospital Capitol dissent. v. Ins. 765 P.2d Life 857, (Utah 1988) (applying 858 the same during The loss was not discovered Aet- contract). principle to an insurance “A period na’s one of three rea- general construction which contradicts (1) sons: Rider expressly provides 6091 purpose presumed of the contract is ... losses; potential (2) includes parties.” be unintended LDS Hos- rider, arising even without a loss pital, (quoting 765 P.2d at 859 Phil liability created of an Schroeder, Royal v. Ins. Inc. Globe 99 may be discovered when the em- (1983)). Wash.2d 659 P.2d 511 ployee’s discovered, dishonest conduct is though liability yet adjudi- interpreting contract, has not been “In a we determine and, cated; (3) majority’s under the parties by examining own what the intended may rule that not be discovered until entire parts contract all in rela sustained, other, giving objective could not tion to each during peri- been discovered the bond reasonable construction to the contract as

367 G.G.A., P.2d at 583 (citing Village Apartments, at 845 Inn 773 P.2d a whole.” omitted). (citations Riemersma, P.2d 1107- Sears added). 1982)) (Utah See also (emphasis determining provision whether a Murphy, 754 P.2d Surety v.Co. plausible meanings, Western capable or more of two (Utah (applying the App.1988) interpretations upon must be based bond). surety ques “Where meaning rule to and natural” same “usual agree of an the result of interpretation used not be tions arise strained construction.” Bueh ment, inquiry is “forced or the first source of within Assocs., P.2d ner v. UWC Block Co. be looked at itself. It should the document 892, (Utah 1988) (quoting 896 Lease Auto entirety and in with its in its accordance Co., 2d v. Mut. Ins. 7 Utah Co. Central parts given All of should be purpose. 336, (1958)). 325 terms P.2d 264 “Contract possible.” Big insofar as that is effect necessarily ambiguous simply are not be Ditch Co. v. Salt Cottonwood Tanner them with party cause one seeks endow (Utah 1357, App. 1359 City, 740 P.2d Lake meaning upon a than that relied different 1987) (citation omitted). Co., by the Block 752 drafter.” Buehner a contract should is axiomatic that “[I]t Hinkle, at 611 P.2d also Jones v. See so of its interpreted be as to harmonize all 1980) (“contract 733, (Utah provi P.2d 735 terms, provisions and which terms all of its merely ambiguous sions not rendered are given possible if it is to do be effect should parties urge diverse fact that (em Hospital, 765 P.2d 858 so.” LDS interpretations.”). added). phasis may not view a sub- Courts interpret- “policy An should be insurance policy of a in isolation deter paragraph way be ed accordance with the it would ambiguous; provisions is all of a mine if it average person purchas- understood together one policy interpreted must be as P.2d at ing Hospital, 765 insurance.” LDS Village Apartments Inn v. contract. at 1108. Draughon, 771 P.2d 859. See also Co., Casualty Fire 790 P.2d State Farm determining ambiguity of test for (Utah (citing 581, 2 App.1990) 583 G. contract has stated an insurance been Couch, Cyclopedia Insurance Law Supreme Court as follows: the Utah (rev. 1984)); Draughon ed. 15.29 v. § cf. language of meaning Would the [of 1105, 1108 P.2d Soc’y, Mut. Ins. 771 CUNA per- a plain be insurance contract] (Utah App.1989) (reviewing particular n. 3 ordinary intelligence and under- son of provisions in context their overall often viewing fairly and standing, the matter interpretation). aids the usual reasonably, accordance with ambiguity words, there is or un meaning “Unless some of the natural language policy, circumstances, of the it certainty light including according to its policy. be enforced terms. purpose should language presume that the used ... We Co., 325 (quoting Lease Id. at 858-59 Auto purpose stated and included 266) added). (emphasis See also P.2d at give to its usual and ordi effect [we will] Exch., P.2d 786 Wagner v. Farmers Ins. meaning.” River Mut. Ins. nary Bear Co. (“we 763, (Utah App.1990) examine 765 (Utah App. 1020 Wright, 770 P.2d v. of the aver- language viewpoint from the omitted). 1989) (citations insurance”). age purchaser of ambiguous may free policy Contract “are Parties to an insurance unclear, terms, or if the terms scope policy’s it is omits exact to define the express par- intention of the losses or may specify used to en- may be intended to policy ties understood two encumbrances A plausible meanings. policy compass.” Valley term Trust Co. more Bank & however, 936 ambiguous, merely P.2d be- Ins. is not U.S. Title Life (Utah v. St. assigns (quoting Brown party App.1989) one different cause 1103, 1107 Corp., 634 F.2d meaning with his or Paul Ins. in accordance Title (8th Cir.1980)). her own interests. right ten,

An has the to contract with even if the result is insurer that the loss is not as to risks it will or' will covered the Aetna bond. insured assume, statutory as long not neither II. DISCOVERY OF LOSS public policy law nor is violated. Thus policy any an insurer include appears While this to be the first time exceptions number or kind of and limita- upon been Utah courts have called to inter- agree will un- tions to an insured pret provision, effect contrary policy. public less to statute or provisions The majori- are novel.1 ty ignores industry practice nevertheless Call, Ins. Farmers Exch. v. P.2d adopts rule a novel of law that a loss (Utah 1985). may not be until discovered the actual dam- interpretations Despite the liberal often' ages resulting liability from the are deter- contracts, in insurance afforded the insured mined. of a to re is not function court “[i]t majority’s interpretation of the bond unambiguous write an contract.” Crowth contrary general purpose Carter, (Utah App. er v. 767 P.2d bond which is cover losses “discovered” 1989) (citing City Corp. Provo v. Nielson during the bond’s period.2 effective The 803, Co., (Utah 1979)). Scott 603 P.2d 806 majority improperly limits the definition bonds, construing “In fidelity follow courts 6091, provided in Rider than rather view it applicable rules to liberal insurance part as a of the contract as a whole. A However, contracts. the bond cannot be purchaser discovery of a would bond rea- by implication by or enlarged extended con sonably interpret definition dis- beyond struction the actual terms covery, as language attached new in Sec- agreement parties.” entered into discovery tion as the definition of as that Co., Casualty FDIC v. Aetna Surety throughout term is used Even if bond. (5th Cir.1970). 426 F.2d 736 exist, majority’s Rider 6091 did not express provisions These contract are not interpretation clear departure is a from the ambiguous merely ap- rendered because established case law which inis fact con- pellant they interpreted claims should be sistent with the definition of according plain other than to their mean- found in Rider 6091. ing_ inject ambiguity will not [W]e If, hand, on the may other a loss not be into a contract where none exists fully discovered until it is adjudicated, as what, party] order to save [a from by the majority, held then the loss claimed retrospect, agree- seems an ill-advised by Home in case still could not have ment. during been discovered pe- Aetna bond Crowther, 767 132 (emphasis P.2d at add- Armitage judgment riod because the ed). Co., Valley See also Bank & Trust peri- not entered until after the Aetna bond 776 P.2d at 937. expired. od had So loss was unambiguous language The of the Aetna discovered either before the Aetna bond bond period, must therefore be enforced writ- I propose, as as after discovery provision 2d, limiting (1982 1. “A ed.). in a bond lia- 13 Couch on § Insurance 46.191 bility [during to losses discovered term] clause, insuring gen- 2. The which establishes the the bond is valid and enforceable. The contract purpose provides eral way parties follows must be construed the (with my emphasis): plainly written it.” Wachovia Bank & Trust Co. Co., Casualty F.Supp. v. 369, Ins. Underwriter, Manufacturers in consideration of an (M.D.N.C.1959). agreed premium, subject Declara- hereof, provision fidelity part Agree- clearly A of a tions made a ments, the General bond which liability limits the Conditions and insurer losses Limitations other Bond, agrees specified period discovered within a certain terms of this with the insured terms, according respect must be enforced to its so ... loss sustained the In- during that there can be on a sured time but discovered Period, indemnify loss is not discovered within Bond and hold harmless specified following time therein. the Insured for [the losses]. limit- any way definition is in rider that the analysis dic- majority’s as the period, majority’s interpreta- Not is the during the ed. tates, was not discovered but it contrary plain tion period. Aetna bond rider, contrary the rules of contract it is

A. Rider 6091 language of the and the interpretation both cover- clearly states that The bond requirements procedural

age and the holding directly con- majority’s discovery of triggered by the 4 are Section riders. general regarding rule trary to our in the bond Discovery is defined riders, a loss. marginal refer- “[Ejndorsements, in rele- which states of Rider means ences, writings which constitute and other vant part: insurance are to part of the contract of policy prop- amended construed with the is further read and

The attached bond para- final Ins. v. following as the Paul Fire & Marine Com- inserting the er.” St. Assurance, P.2d 4: mercial Union graph of Section 1980) (Utah (quoting 1 on In- Couch Insured Discovery when the occurs 15:30).3 2d, surance § would of facts which becomes aware to assume person reasonable cause a Union Trust Bank v. National Royal has by the bond a loss covered Cir.1986), (11th 788 F.2d 719 Ins. Fire though incurred even been or will be part limit of a bond tried to one the bank of loss amount or details the exact language in a rider. applying the in- Notice to not be then known. a declaration bank claimed that potential claim of an actual or sured during the losses discovered bond covered alleges that party a third 4, applied to period should be Section circumstances, is liable under insured located, should not be it but wherein was which, true, loss un- create a would expressly excluded applied to a rider such dis- this bond constitutes der claim known to the insured liability covery. The inception of the bond. prior to the claim, pointing rejected the bank’s foregoing of dis- court I definition believe merely more ex- rider a is out that the throughout the bond and covery applies presumption that plicit of the The definition restatement appeal. of this dispositive prior to the bond any losses discovered discovery potential of a clearly permits the Similarly, the though period were not covered. “will be incurred even loss that of discovery added means of of loss definition or details exact amount 6091, Trust Royal like the rider in Rider also states that known.” The rider then be consistent, explicit, Bank, but more poten- is a party of a mere notice from a third discovery as what constitutes statement of liability, such as the tial claim of throughout whole lawsuit, discovery. There it is used constitute would dispute, under the defini- no serious can be attached bond” amends Rider 6091 “[t]he in Rider that Home tion found language un- and additional include new prior to the effective its loss discovered erroneously majority The der Section period of Aetna’s bond. to the the rider is limited assumes 4 found Section because however, provision notice improperly majority, rider of the on the bottom the instructions of Rider 6091 to limit the effect strains “revise sections that the rider is to despite the fact indicate 4. It does so only Section rider “revis- The fact that the 12 and 4.” absolutely indication there is provided a form insurance in policies contracts of constitute an inte- to insurance 3. Riders modify provisions in the thereby, Couch gral part of insurance. 1 as to of the contract so 2d, (1984). p. This is policy, 4:27 386 a rider is body § on Insurance and where such of the a new and different attached, if the rider adds provision, true even meaning pursuant properly to such contract, asserted standard as is to the supersedes and part the contract a it forms majority. Id. at 386-87. applies. original provisions to which expressly policy au- 4:29, (1984). laws sometimes Standard p. 391 2d § Couch on Insurance 1 slips or riders to the attachment of thorize 370 paragraph, questions unambiguous a as an

es” Section 4 to add new however, indicates that the way in no ef- term of the bond. paragraph fect of the is limited to new 4 supports itself Section merely Section 4. The reference is all, such a conclusion. First of the dis- location, effect. There is not to the abso- covery definition added as a new lutely no Rider indication separate paragraph to Section 4 which cov- procedural provision, definition purely is a including loss, topics, ers several notice of by majority. as assumed The definition loss, proof proceedings. legal It is discovery becomes new and additional provisions repre- not limited to notice as part of the bond’s Conditions and Limita- majority. sented Each of the time which, by express tions terms of the periods topics relating begin to these when determine the extent of of- a loss For example, is “discovered.” Thus, fered.4 bond’s by the own consistent (1) provide insured must the insurer with applicability, internal references to the dis- practicable notice of the soon as loss as covery 4 applies definition added Section (2) discovered, proof after it is file a of loss aspects procedural both the of Section loss, within six months of aspects coverage. substantive (3)

See, bring suit under the bond within e.g., Ins. Clay, Co. v. Life twenty-four Kan.App.2d (1989) P.2d months after the loss is discov- (“The discovery clearly definition of ered. grants acts as Section also an extension of coverage”).5 a limitation on begin legal proceedings time to to recover under the bond if the insured is attempting Given the fact bond contains one judgment recover on account of a discovery, definition of and there is no limi- against If the insured. an insured seeks definition, purchaser tation of that judgment, on account aof as does reasonably bond would interpret Rider Home, twenty-four the insured has months providing 6091 as the definition of “dis- following entry judgment final covery” throughout used the bond. before it begin legal must majority proceedings presents plausible no other If, interpretation holds, Aetna. the majority that would ren- der loss could application prior Rider 6091 not have been discovered ambigu- and entry ous. The the discovery Armitage judgment, definition found of the in then why Rider 6091 applied should therefore be does expressly provide the bond an insuring explicit majority The bond’s clause is attempts distinguish with 5. The Royal regard general applicability to the of the by con- Trust Bank and Home Insurance claim- Life Limitations, ing tract’s Conditions and of which that the in Section 4 those cases differed key provision. insuring Section 4 ais The substantially present from the Section 4 in the part, my emphasis: clause reads in Underwriter, with cases, "The language bond. The ever, used in those how- agreed pre- in consideration of an virtually language to the identical used mium, subject and the Declarations made a present in insuring the case if one looks at the part hereof, Agreements, the General Conditions together, clause and Section 4 as we must when Bond, and Limitations other terms looking at bond the Aetna as a whole. The insured_’’ agrees with the majority the regarding asserts that coverage immediately preceding the definition foregoing incorpo- bond reiterates the discovery Royal enlarged Bank bond top page ration at the four which contains the given, the context in which the definition was Page conditions and limitations of the bond. reads, whereas the location present my definition in the again emphasis: four with "THE case, i.e., discussing proce- in a section FOREGOING INSURING AGREEMENTS AND aspects, dural limited the definition to its imme- GENERAL ARE AGREEMENTS SUBJECT TO entirety, diate ever, context. Section in its THE how- FOLLOWINGCONDITIONSAND LIMITA- bond, express TIONS." terms of the must interpreted greater also be provides, my emphasis, Rider 5538 also in context of subject purposes what “the attached shall be constitutes to all its of cov- agreements, erage. except See limitations conditions note 3. The definition therefore expressly applies throughout majority as herein modified." The the bond and is not limited points "express Draughon, no modification” of the to its dis- immediate context. See covery (review provisions definition added to Section P.2d 4 that would at 1108 n. 3 in overall prevent context). applying insuring it from to the clause. (reviewing particular provision of n. 3 in over- arising claims on account extension for interpretation); judgment? all context often aids West- (“the at Surety ern 754 P.2d liable, majori- In order to hold Aetna primary rule determine ... is to what obligation to enforce unam- ty ignores our parties by looking intended entire ambiguity into the biguous terms and reads parts contract and all of its in relation to adopting unprecedented rule contract other_” Sears, quoting each 655 P.2d at interpretation. For the- first of contract 1107-08). state, held that if a time in this a court has specific contained in a sec- definition is not meaning The usual and natural definitions, the outlining general defi- tion “discover,” applies present term as it to the only nition will affect section case, sight is “to obtain for the first time majority it is located. The contract where knowledge.” Webster’s Third New In- absolutely support for this new offers Dictionary (Unabridged) ternational obviously rule. a rule will flawed Such (1986). however, majority, concludes requir- disharmony in contracts create twice, the loss discovered be key ing more than one definition terms meaning thereby contradicting plain in more than one section of a that are used Contrary the word “discover.” to the ma- contract, in a but which are not defined jority’s that it blanket assertion is harmon- general section. It would create definition izing the terms of the it is clear that interpreting confusion in contracts majority has created considerable dis- agreed par- contractual definition harmony and confusion where none had single ties would effective within a previously existed. common-law defi- section while a different throughout nition would be effective majority applying errs in not the contract.6 remainder of the definition of dis- in The clear covery provided Rider 6091. given a definition The correct rule is that parties intention of the as set forth contract, section of a even to a term one rider, clause, throughout insuring though general it is not in the definition the remainder of the bond is that the defini- section, applies throughout contract so throughout By entire apply tion interpreted the term consistent- will be limiting effect of Rider 6091 to Section See, ly throughout. e.g., Wagner v. Farm- has, effect, majority rewritten Exch., (applying ers Ins. 786 P.2d at 765 to create order definitions found various sections of when, express agree- Aetna’s bond contract to other sections of the insurance contract). parties, none exists.7 Draughon, 771 P.2d at 1108 ment of the Cf. case, present "discovery of loss” means It is after Home has met its burden In the 4, discovery by possible burden shifts to Aetna if it wishes to of a loss in Section but that the majority’s holding, as a defense. When an virtue of the it means dis- raise exclusions covery damages throughout right policy. to recover under a of the actual insured claims approach problem must rest of the bond. The in this The insured readily recognized when one considers that bring field therein de- himself within the rule, majority pronounces the even as the brought with- fined .... He then has himself rejection Despite express violates it. its policy, the terms thereof have been possibility discovering potential loss under brings himself within the met.... When he law, majority interprets "discovery the case insuring case ... and clause he has made his potential to mean the of a loss of loss” any exceptions which would or conditions considering attorney relief, indemnification for when deny then him take him out of case, provision present fees. But in the inopera- indemnity provisions, render them regarding attorney defense, him, fees is located in Section C and the tive as to are matters Agreements, of the General not Section 4 of the burden thereof rests on the insurer. "potential and Limitations where the Conditions (quoting Hospital, Brown- LDS 765 P.2d 859 discovery is loss” definition of located. Soc'y, ing 570, 573-75, Equitable Utah v. Assurance 94 Life 348, (1938)). P.2d 350-51 80 insuring acknowledge majority at issue is found in the 7. The also fails to proving which defines the field within Home has the burden of that the Armi- clause itself ma- tage establish its case. The loss was discovered within the effective which Home must jority dis- period the F D nevertheless treats the definition of of Aetna’s bond rather than &

372 Majority’s Departure

B. From law because it misunderstands the term

Established Case Law “loss.”8 6091, Even in the absence of Rider types There are two of loss covered majority’s interpretation of Aetna’s bond is (1) bonds: when an insured immedi- contrary to the well-established case law ately parts with property its as a direct holding that a loss is discovered on “the employee result of inas cases date the fraud was discovered embezzlement; (2) of theft or when bank—not the date the bank was called liability insured incurs due to the dishon- upon good.” to make the loss v. FDIC esty employee of an eventually Co., Casualty Surety & 426 F.2d pay causes an insured to damages, such as 729, (5th Cir.1970)(quoting 739 Mount Ver liability incurred Home in this case. non Bank & Trust v. Aetna Casualty Co. See Bank & Trust Co. v. Central Jefferson Co., 666, Surety F.Supp. & 224 670 Surety 825, Corp., & Ins. 408 S.W.2d 830- (E.D.Vir.1963)). general, a loss is (Mo.1966). 31 The Aetna bond indemnifies deemed discovered when “the insured ac Home types both of losses. See id. quires knowledge fraudulent or dis (notice provisions regarding potential loss- resulting honest act in loss.” USLIFE provisions es and handling of defense Loan Surety Sav. & Ass'n v. National indicate that a liability). bond covers 336, Corp., Cal.App.3d 115 Cal.Rptr. 171 The trial majority court and the treat this 393, (1981). 399 generally, See American case as if the loss part- were an immediate Surety 133, Pauly, Co. v. 170 U.S. 18 S.Ct. ing property. cases, with In such it is 552, 557, (1898); 42 L.Ed. 977 American obvious parting that the must occur in or- Surety 160, Pauly, Co. v. 170 U.S. 18 S.Ct. case, however, der to be discovered. This 563, 564, (1898); 42 L.Ed. 987 Perkins v. does not parting involve an immediate Bank, 327, Clinton State 593 F.2d 333-34 property involves a arising out of —it (8th Cir.1979); Fidelity United States liability to the borrowers created Empire Bank, Guar. Co. v. 448 State F.2d dishonesty. Glad’s The Armitage court 360, (8th Cir.1971); 366 Splendor Hidden voided the trust deeds promissory Mining v.Co. General Ins. Co. Amer forgave notes and the debts because Home ica, 515, (10th Cir.1966); 370 F.2d 517 Al violated the securities laws and the truth- Co., Co-op. Elec. v. Travelers Indem. falfa in-lending words, laws. In other F.Supp. (W.D.Okl.1978); Na was liable to the borrowers for their losses tional Newark and Essex Bank v. Ameri because of the manner in which Home can Ins. 76 N.J. 385 A.2d granted the loans.9 (1978); State Bank & Trust Jefferson Surety Corp., Co. Central & Ins. majority puzzled seems (Mo.1966). S.W.2d merely cases “assume” that the loss has sustained, been damages even if majority were not distinguish strains to yet established. The foregoing merely cases seem presenting any cases without support position. cases in assume that the loss No other has been sustained approach case has taken the that a because a loss that liability arises from may be discovered is, fact, more than once. The created a dishonest majority distinguish must strain to occurs, the case sustained when the misconduct not covery fact, as if it were majority an exclusion. selectively and the trial court have discovery party-neutral. definition of is The combined "loss” with the first word of the it, upon i.e., burden therefore phrase following lies Home to show that "sustained" and taken during the loss was discovered Aetna’s bond the words out of context to create the term "loss period. presumption against There is no sustained.” on that issue. 9. The bond itself indicates that it is the miscon- duct, majority repeatedly 8. The and resulting the trial legal damages, court not the that con- indicate that the Aetna bond was intended provides stitutes the loss. Rider 6041 that Aetna any cover "loss sustained" or compensatory "sustained loss” is damages liable for "direct yet appear and arising those terms never in Aetna's a loss covered under this bond.” from apparent clause, insuring added.) bond. As (Emphasis is from the recognized reasonably have known determined. damages are the actual when a had suffered loss Aetna, at 735 that 426 F.2d claimant] See, [the FDIC v. e.g., apparently intended to that nonconforming notes af- (FDIC disposed [the claimant] of such attempt to hold the bank liable for period and suf- of bond the termination ter Bank, 408 at 832. $408,362.97). S.W.2d The loss is loss.” a net loss of fered Jefferson Aetna, F.2d at 739 com- also FDIC dishonest act is See when sustained (the rule is that well established factual mitted, a court makes the when not “acquired insured has occurs when the that the act was legal determination specific fraudulent or knowledge of some lia- the insured is therefore committed might involve cre- dishonest act which misconduct that damages. [In- The ble misconduct”). liability for the complete it is is when a covered loss surer] ates damages not when performed, that the majority correctly reasons The Liability adjudicated. are misconduct by means cannot be satisfied loss element at the time of “sustained” is therefore possible a “possible loss” and that of misconduct, judg- final not at the time of majority compensable. What may loss/liability therefore be ment. realize, however, is that the two fails to following the oc- any time “discovered” coverage as established preconditions to misconduct. currence of the insuring phrases' “sus- clause against the in- receipt during a claim time” and “discovered tained at that sured, discovery of misconduct separate period,” each relate to the bond claim, consti- subject the insured to a recovery. “Sus- condition of and distinct discovery of a loss. tutes requirement is the that tained at time” in fact be an actual out-of- actually discovers dis- there must the Bank Whether is, any compensation how- will actually pocket incurs a loss loss before honesty or during peri- ever, irrelevant. A loss is “Discovered completely paid. be meaning od,” hand, who out within the the other determines “discovered” pay compensa- of the Bond when provisions possible insurers will facts sufficient party discovers in fact occurs. The insured tion if an actual loss the insured totally separate create a condition which and dis- inquiries are two a claim might subjected to tinct. by the Bond. it is indemnified majority erroneously concludes Fidelity Bowie v. Nat’l Bank

First insured indemnify an the issue of who will York, 634 F.2d Casualty New Co. the issue be determined before cannot Cir.1981). (5th to indemni- the insured is entitled whether simply incon- is decided. This it is the fication clearly establish that The cases industry practice insurance sistent with the against the insured based receipt of a claim at the time the policy in effect dishonesty, adjudi- not the upon coverage, even provides claim, occurs constitutes dis- event cation of coverage is still Bank, though the extent of covery of the loss. See Jefferson car driver example, For (“the discovery unsettled. time of at 831 408 S.W.2d changes to a and then causes an accident is not intend- loss mentioned company, there would be new insurance a claim of the the time when ed to be policy in effect insurance question that the ulti- depositor or customer is established be the accident occurred would when the mately by entry judgment.”); see also though coverage, liabil- Bank, provide even F.2d one Perkins v. Clinton State adjudicated when the new Cir.1979) (bank ity not been (8th discovered purchased. policy complaint). served with loss when place policy is discovered, A insurer whose employee misconduct is Once step right is filed has when a lawsuit against the insured presented a claim is against the suit the defense misconduct, in and assume the loss has been based on must indem- that insurer who it is discovery of because time discovered. “[T]he damages any actual nify insured for must against is when the bank risk insured closed, Once the loans were no further resulting generally from the suit. See Bowie, 634 F.2d 1000. liability. Bank action occurred to alter that In First Nat’l of damages fact, result from the law- nothing If no actual there was that Home could and the insurer suit then the insured escape liability. have done to The “loss” See, sigh of relief. a collective breathe pur- therefore sustained before Home possibility damages that no e.g., id. only the Aetna bond. It chased simply may actually result from a lawsuit liability judicial determination of and extent determination prevent does not an earlier loss, i.e., damages, the actual in- possible insurers will of which of required adjudica- remained unknown and damages if demnify an insured for those tion to settle. Inasmuch as Home knew they are awarded. and when claim, as well as Glad’s al- involvement, leged dishonest Home must by receipt Coverage triggered be deemed to have discovered the loss be- against by discovery insured or claim purchased fore it the Aetna bond. Since of dishonest conduct because such events during discovered F D prone manipulation. are If a loss the loss was the & liability period, its peri- will not be covered until and not the Aetna bond court, damages adjudicated by od, it does are Aetna is not liable to Home for the great imagination not take a deal of to see Armitage loss. litigation parties seek to time that

how will Even to their own benefit. without Coverage Majority’s Approach Under C. manipulation, great there is a risk If a loss could not discovered until it coverage may lapse after the miscon- loss, by becoming is “sustained” an actual discovered; duct has been but before the majority, as held there still could be fully adjudicated. case has been The insur- recovery in this case because the actual company simply ance could then refuse to damages were ascertained the effec- after paying renew the bond and avoid ever period of Aetna’s tive bond. The bond company the loss. No other insurance extension itself makes it clear that the Ar- step agree in- would then forward and loss was not mitage covered. pending sure loss absent a large premium compensate for the dra- option granted Pursuant to the to Home matically increased risk. In such a situa- parties in Section 12 of the ex- tion, would, probability, the insured in all 20, August tended 1985 un- majority’s ap- become uninsured under the extension, August til 1986. This how- proach. ever, scope was limited case, covered the liability, Home incurred losses “sus- loss, prior thereby granted August “sustained” a when it tained” 1985. It did complying the loans without with the truth- not extend for losses sustained in-lending and the during period.11 laws securities laws.10 the extension majority’s Rptr. 10. The characterization of this case as The loans in this case had all simply loan case is process being fraudulent/bad erroneous. defaulted and were in the fore seeking The loss that Home is to recover is not pur closed before the Aetna bond was ever falsifying the result of Glad's chased. Inasmuch as Home knew that Glad’s applications causing loan Home to lend dishonesty defaulted, part why the reason the loans they more to the borrowers than were able to again one must conclude that repay. The loss is the result of Glad’s violations during losses were discovered the F & D bond truth-in-lending laws and the securities periqd. liability laws which created for Home. The parties 11. The rider which the extended cov- majority’s reliance on Mort- Pacific-Southern erage provides: gage Trust Co. v. Insurance Co. North Amer- ica, Cal.App.3d Cal.Rptr. agreed It is that: (1985), misplaced. is therefore subject 1. In accordance with and to the provisions Even if this claim were the result of the is of the Section of the attached bond loans, "Rights suance of bad the losses were "sustained” entitled lation,” After Termination or Cancel- purchased. hereby grants before the Aetna bond was the Underwriter period court held that "the loss oc Insured a of twelve months from 12:01 Pacific-Southern day August, curred when the loan defaulted.” Id. 212 Cal. a.m. of the 20th to 12:01

375 question, majority which a loss can- The first majority holds that Since adjudica- final until the is totally ignores, “sustained” whether this not be loss at the earli- tion, “sustained” its purchaser Home A ambiguous.12 a fideli- even Ar- judgment was entered when est ty reasonably interpret bond would loans. Home’s rescinding case mitage foregoing provision mean that the bond at following statement made counsel any employee to be will not cover known court: argument before this oral at the time the takes effect. dishonest returned a ver- August jury 1984 the In application in- supports Savings. In March adverse to Home dict was terpretation. Glad not even listed as judg- to a that verdict was reduced 1986 intended to If a employee be covered. that resulted in the avoidance ment purchaser of were to reasonable the bond deeds, establishing a the notes trust 11 as a for read Section bar to Now, parties all Savings. to Home already any employee to be dishon- known briefs, litigation agree, in the in this est, in- purchaser logically would not which writing, point that that among employees to clude his name At Saving’s Home loss was established. majority proposes no other covered. from the point it could not recover meaning to 11 render Section am- plausible borrowers, it collect from could not parties agreed biguous. The that the bond deeds, and the loss. trust that established employees to be would not cover known added.) (Emphasis agreement That should be en- dishonest. majority’s approach, the loss Under I as written. would therefore hold forced sustained after the termination was provides 11 unambiguously that Section loss, therefore, period. The original bond any does not miscon- that the bond cover limited exten- was not covered under the already by Glad because Home had duct sion. pur- learned of Glad’s before the bond.13 chased EFFECT OF DISHONESTY III. GLAD’S provisions law on such as Sec The case 11 UNDER SECTION is void ab tion 11 indicates the bond if the loss discovered within Even was initio as to Glad. Ritchie Grocer Co. period, it fell under the exclusion the bond Co., 499 Casualty & Sur. 426 F.2d in Section 11 of the bond which provided Cir.1970), (8th proposition stands “This ter- provides: bond shall be deemed any is void ab initio as to that a bond Employee— or cancelled as to minated be employee known to be dishonest before (a) learn of as soon as insured shall Verneco, Fidelity In & ing hired. Inc. v. part or fraudulent act on the dishonest ” 721, York, New 253 La. Casualty Co. by Employee.... As is evident (1969) employee 219 So.2d 508 language, purpose clear foregoing dishonest when hired and was known to be employees is to insure those the bond working already insured when At issue is not known be dishonest. purchased. holding that the Lar- bond the Aetna bond ever covered whether was never covered ry Glad. 1986, (1967); Casualty day August, Grocer & 20th within Ritchie Co. v. Aetna a.m. of the 499, Cir.1970); Co., (8th the In- Surety to discover loss sustained F.2d 426 502-03 prior Verneco, hour men- Fidelity sured date and Casualty New Inc. v. & Co. first 721, 508, (1969). tioned. York, La. 510 So.2d added.)

(Emphasis 20, December discovered or about 13. provi courts considered 12. Those which have $15,000 1981, Larry Glad had received a sions like Section have all considered $15,000 Robert kickback from Mitchell. unambiguous declara provisions to be in their $31,000 part payment of a received fee employees to be dishonest at tions that known arranging a See, Mitchell from AFCO for Robert inception bond are not covered. $100,000 employ- Larry loan to AFCO. Glad’s e.g., Paper Joe Co. v. Accident St. Hartford Cir.) (5th December Indemnity ment was terminated effective cert. 376 F.2d 389 U.S. S.Ct. 19 L.Ed.2d 86 denied gave following Douglas court rea Vemeco C. Wilson & Co. v. Insur soning especially appropriate America, that is ance Co. North 590 F.2d 1275 present (4th Cir.) case: 831, cert. denied 444 U.S. (1979), S.Ct. 62 L.Ed.2d 39 which is implicit

We think it is in these situations directly point. Wilson, In the insured parties approach that the the installation during learned a routine audit policy assuming employees of the that all that a vice president had they falsifying are honest until are known to been the dates and be Thus, if the then has the amounts of otherwise. insured advances on standard HUD forms, knowledge person dishonesty. of a dishonest his a clear act of The vice aware, employ, president he is the terms of the indicated to the insured that the clause, practice exclusion that he is not insured industry. was common in the The employee. for the dishonest acts of that practice immediately stopped. Some contrary A later, view of the exclusion clause time changed the insured insurance plaintiff urges adopt such as the us to purchased carriers and fidelity bonds from permit would the insured to insur- obtain Company Insurance of North America ance the dishonest acts of em- (INA) and Hartford.15 After the INA and ployees he knows were dishonest ... al- effective, Hartford bonds became the in though plainly the exclusion clause indi- sured presi discovered that the same vice cates there can be no after the dent had not secured letters of credit which knowledge” insured “shall have of dis- required the insured was to secure. The honesty employees: of his president falsely vice had nevertheless cer tified that he had secured the Id. at 510-11. letters of credit. The court held that since the in only Not can an individual be excluded president’s sured had known of the vice Section might but whole transactions dishonesty in falsifying the HUD forms not be covered. an insured When knows inception” “before the of the INA and prior purchase of a bond that a policies, Hartford and since the insured did previously transaction entered into notify INA and Hartford of the vice insured is tainted dishonesty, the en president’s previous dishonesty, INA and tire transaction is not covered. See St. Joe Hartford could not be held liable for the Paper Co. v. Accident & Indent. Hartford president’s losses caused the vice failure (5th Cir.1966) 359 F.2d 579 cert. de to secure the letters of credit. nied 389 U.S. 88 S.Ct. 19 L.Ed.2d (1967). directly The court Wilson addressed the argument accepted by majority in this proper inquiry to be derived from rejected case and it. dissent would these cases is employee “[T]he whether an is have INA and liability Hartford assume known be dishonest at the time the bond resulting losses from acts committed be- supposed is employee. to cover the If any inception fore the respective poli- of their known, dishonesty is the bond never covers cies who was never within employee. Because Glad was known to policies. This is an be dishonest at the time Home desired Aet- untenable result.” (empha- Id. at 1279 n. 6 Glad, apply na’s bond to Aetna’s bond original). sis in did not cover Glad. majority nevertheless refusing Wilson, seeks to invali majori- to follow

date Section 11 as a public polic ty matter of selectively quotes parts of the Wilson y.14 It distinguish strains to regrets this case court’s as if that court felt it had majority apparently attempting claim, pre- dishonesty, or notice of a coverage lapsing vent changes words, the risk of if an insured triggers coverage. majority In other employee's insurance carriers after an seeking artificially to abate a risk that it has dishonesty is discovered and the insured knows created. liable, but before there is a final judgment establishing any actual loss due to 15. The INA bond contained the same arises, however, dishonesty. That risk as contained in the Aetna bond at issue. majority recognize because the refuses to its F & D that is now to recover on The full text poor decision. rendered fault, Aetna’s. In its efforts to Home’s otherwise. reveals case, present hard coverage in the find in which Wilson position The unfortunate majority makes bad law. part by in was occasioned finds itself timing change as to bad luck sheer Fidelity majority The relies & Casu part by poor judg- and in in insurers Bank alty New York Central Co. However, its own officers. ment of Houston, (Tex.App.1984), 672 S.W.2d admonition, Holmes’ of Justice mindful truly creating a novel and erroneous hard case as a vehicle use this we cannot as theory that a successor insurer legal make bad law. liability predeces all incurred sumes they at 1280. simply Id. both use sor insurer because majority’s standard form. the same rely upon court did not The Wilson analysis contains several serious flaws. majority. as asserted “sheer luck” provide it Aetna indicated that would When timing of the recognized that the simply It coverage previously with the same insurers, poor busi- change along with D, referring F to the provided by & was the insured unin- rendered judgment, ness coverage.16 any way It not in type simply revealed its Had the insured sured. by F D assuming liability incurred president’s dishon- knowledge of the vice previous period. “Where during the applying Hartford when esty to INA and language to the effect no bond contains bonds, have still new it could been for the bond, prior of a it is it is a continuation that covered. and will not be independent contract case, majority’s appar- present In continuing provide deemed to to find cover- need to stretch order ent bonding period.” prior from a USLIFE justified given simply for Home is not age Assoc., Cal.Rptr. at 400. Loan Sav. & under the that Home was insured the fact for Aetna to be liable for Glad’s In order D at the time of Glad’s dishon- F & bond acts, had to us, Aetna would have Home dishonest reasons unknown to esty. For F expressly agree to continue & D’s cover- under the F pursued indemnification never during the F & D age of as it existed attempted bring F & Glad D & bond. simply was no such suit, period.17 There Home blocked that D into the but coverage by the Aetna bond. showing assumption of that effort. There has been fact, clearly states in Rider Aetna’s bond to recover under Home will not be able policy “coverage under this or 6059 that D even if Home is unable F & but considering Management, when she be- majority Health Inc. errs in even west 16. also longer proposal able to work since it was not came disabled and was no the bond kept of the contract. within the four corners her on its records as found full time. Southwest leave, employee, awarding writing her sick a full-time parties reduced to [W]hen vacation, time, complete After she became appears and certain and so forth. what to be a disabled, conclusively presumed, negotiated group agreement, a new in- it will be Southwest fraud, writing con- the absence of policy Great-West Life Assurance surance agreement between the the whole of the expressly tains parties. policy limited cov- Co. Great-West’s Also, parol of contem- evidence employees erage and defined full- to full-time conversations, representations poraneous or passed employment. When Mrs. Perkins time pur- be received for the statements will not sought away, to recover on Great- her husband varying adding pose or to the terms of the policy. Great-West then West’s life insurance agreement. written not a full-time that Mrs. Perkins was discovered Woolsey, Lehi v. 565 P.2d State Bank employee inception policy and had at the (Utah 1977). improperly majority has used employment. Her returned to full-time never proposal language to add a new term the bond premiums and her husband’s were returned agreement. to the written policy denied. This court claim coverage, reasoning that upheld the denial recently court held in Perkins v. Great- 17. This "[sjince employ- an active (Utah Perkins was not Mrs. Assurance 814 P.2d 1125 West Life policy, date of the Great-West ee on the App.1991), that a insurer does not automat- new effective thereafter, she was not insured time ically employees all have been cover (emphasis policy.” add- Id. at 1129 predecessor policy. under that under a In that insured case, ed). Mrs. Perkins was an of South- approach effective until such der either response shall not become F D provided clearly the & inaccurate and other should bar re- [as Contrary covery.18 has terminated.” bond] majority's assertion that there is no evi- however, The majority, rejects Aetna’s continuation, Rider dence as to issue by effectively rewriting claim Utah Code parties expressly shows that 31-19-8(1) (1974) Ann. provides: § agreed was not a the Aetna bond Misrepresentations, omissions, conceal- coverage provided of the un- continuation facts, ment of and incorrect statements majority’s the F D The hold- der & bond. shall prevent not a the under ing directly contrary is therefore to the policy or contract unless: express agreement parties. the (a) fraudulent; or present policy The in the case insurance (b) acceptance to the material either clearly only provides fidelity states that it risk, the by or to the hazard assumed not employees for known to have insurer; or and it previously expressly been dishonest (c) good insurer faith either provides that there is continuation of would not con- policy have issued the or F coverage provided by the & D bond. tract, issued, or not have would reinstat- Home the effective Since knew on date of ed, or it at premium renewed the same performed the Aetna bond that a Glad rate, issued, or not would have reinstat- act, dishonest never insured un- Glad was ed, policy or or as renewed a contract in the Aetna der amount, large an or would pro- not have respect vided with to the haz- IY. TO DUTY DISCLOSE loss, resulting ard if the true facts inquiry Aetna claims that the in- had been known to made the insurer as application regarding surance losses “sus- required by application either for during years required tained” six the last policy or or contract otherwise. the disclosure of Armitage lawsuit indicates, majority correctly As the Home, already pending against which was issue is whether Home duty had a under that Home’s failure to disclose the the statute application to disclose for recovery. any lawsuit now bars If a loss the Aetna bond the material it fact that arising liability from is “sustained” when being sued for over one million dollars occurs, propose, the misconduct as I then because of the dishonest conduct an already loss had fact been employee. majority The erroneously con- applica- sustained when Home filled out the cludes that had no be- duty Home that, tion. I also believe even under the cause explicitly inquire Aetna failed to majority’s reasoning, request for infor- pending about cases. concerning mation sufficiently losses was place By clear to Home notice focusing only duty on that Aetna on the provide pending po- wanted information about or information specifically requested in the application, tential claims. I would therefore majority only hold un- considers application following 18. contained war- The facts case in this indicate that Home ranty prior application knew any did not that it know of insurance that Reese, employees Elaine application, one of the any listed in employees committed had committed dishonest acts application. listed in the backdating the loan documents at di- Glad’s present employees officers and misrepresentation rection. "A fraudulent insured, time, complete of whom a list at this application employees such an that the insured’s held, above, positions given have to have been deemed faithful is material to the risk belief, knowledge the best of the insured’s undertaken the insurer and renders that always while in the service of the insured Loan, bond void ab initio.” Phoenix Sav. & v. Aetna Inc. performed respective honestly. their duties Casualty Surety 427 F.2d There has never come to its notice or knowl- (4th Cir.1970) (interpreting warranty). same edge any judgment which in the information pursue did Inasmuch as Aetna misrepresentation claim of the insured indicates of the said provision, on this we based employees officers and are appeal. dishonest. have not addressed already against pending have claims it. “concealments of “misrepresentations,” fact,” already These The there a million and “incorrect statements.” fact re- possible types of affirmative pending against an applicant are dollar claim inquiries application in an cover- sponses obviously probabilities skews there however, majority, by the ed statute. being policy. a. claim Not ignores totally “omissions” which stat- possible prevents claim knowing about omissions, By including also covers. ute accurately determining from the insurer applicant has a statute indicates estimating pending its risk. Inasmuch appli- more duty to disclose than what obviously being claims affect hazard requests. The statute specifically cation by the insurer and assumed there is no may be clearly provides that Home barred “speculate” pending need to whether law- recovery if it omits facts are relevant, appli- suit is I hold would to the hazard assumed “material ... duty cants insurance holds, majority today how- insured.” The 31-19-8(1) section disclose ever, may insurance applicant that an for pending claims or be barred obviously critical and relevant infor- omit on such claims. explicitly if insurer fails to re- mation the The majority’s contrary conclusion is also words, such In other quest information. duty to the common law of disclosure itas “omission” majority the removes the term fidelity relates to bonds. by holding that an from the statute omis- said a may be to be' fundamental [I]t legal impossibility. is a I such sion believe principle fidelity guaranty the of law of rewriting unambiguous an statute is of agent, of an whose contrary legislative and to the intent out- bond, guaranteed under fidelity was a authority. our judicial side of the of ambit surety or time the exists before at the applicant fidelity An for insurance has a thereby, the bond becomes bound duty provide material information in its principal surety conceals it from the against application, pending claims such bond, obtaining fidelity the time of the insured, directly requested if not the even the surety the is not losses liable It is provide such information. true therefrom; resulting ... mere non- [T]he that, general, expert the insurer is affecting of the circumstances disclosure has a duty risk assessment and therefore of parties the situation which are that it are inquiries to make feels relevant surety acquainted to be material for of That does not assessment risk. knowledge with and are within the of however, sophisticated pur- a mean bond, person obtaining surety un- Home, insurance, chaser such as though due concealment even not willful This eye a case turn blind obvious. to or with a view ad- intentional gray is not a area where the vantage to himself. might suit have been relevant. Indemnity West Am. Fin. Co. v. Pacific 31-19-8(1), interpreting In section 963, Cal.App.2d 61 P.2d 968 Supreme indicated that a Utah Court has (1936). if it misrepresentation is “material dimin- surety for One another who becomes opportunity to the insurer’s deter- ishes ordinarily presumed to do so must be Berger its mine or estimate risk.” upon the transaction be- the belief that Co., 723 Minnesota Mutual Ins. P.2d Life principal parties tween the one occur- (Utah 1986). blatantly It is obvi- ring in the usual course of business potential for over ous that a claim one description, subjecting him dollars, already by million known it; attending ordinary risks and the applicant, affects the “hazard assumed party surety he must to whom becomes companies the insured.” Insurance set presumed to that such will be be know premiums possibility their based on the understanding, his that he will act occurring. assump- an event One of it, issuing upon he there an makes fi- unless is informed that tions insurer when af- delity applicant extraordinary does are circumstances bond is that some surety To receive a the bank knew the fecting risk. dishonest conduct or acting upon known be belief any pending applied knew when circumstances there are unusual endorsements, loan. The in and of materially in- his risk be which will themselves, were not dishonest on their creased, knowing that are well there best, large At face. amount of loans circumstances, having a suit- president endorsed vice an indi known, make them opportunity able might cation that there been exces them, regarded withholding must be sive amount of risk attached to the bond fraud, surety will legal as a investigation. that warranted additional contract. be relieved from his holding simply of Howard is that neu Surety, 170 U.S. 18 S.Ct. at American might tral information that indicate some (quoting Cooper, 36 Me. Bank v. thing may be amiss and further in (1850)). quiry might necessary issuing before imposes upon duty rule an absolute Th[e] expressly requested must be be obligee to volunteer disclosure of all recovery. fore omission would bar affecting materially facts the risk to the case, present however, Home knew of surety Irrespective alleged dishonesty both the and the Armi- intent, motive or mere non-disclosure tage lawsuit and that the could lawsuit lead obligee facts known which materi- large to a claim the bond. risk, surety’s affect the such as a ally Co., In State v. Ins. United 26 prior dishonesty principal of the on the Pacific Wash.App. 68, (1980), P.2d 612 809 the fidelity discharges therefore the insured school district did not disclose that

surety. employee previously charged had been Iwasaki, Bank Sumitomo of California first-degree forgery with as a result of a 81, 564, 568, Cal.Rptr. 70 73 Cal.2d 447 non-work the Contrary majori- incident. omitted). 956, (1968) (citations P.2d 960 ty’s holding characterization of the in that majority misinterprets The the cases case, Washington Appeals the Court of ex- upon it holding relies in that Home pressly adopt refused to an absolute rule duty had the pending no disclose law duty part that there was no on the suit. In Fidelity United Guar. States applicant provided to have the information. Howard, (5th Cir.1933) Co. v. 67 382 F.2d Instead, it held that the 663, cov- cert. 291 54 denied U.S. S.Ct. 78 despite ered the nondisclosure because the L.Ed. reh. denied U.S. (1934), company S.Ct. L.Ed. insurance had not relied on the insurer the money president asked how much a vice application and therefore had not been mis- bank, owed but did not ask by whether (The led the nondisclosure. insurance president vice any had endorsed loans company require did not even the applica- made the bank. The bank col later completed.) present tion form to be In the lapsed it was discovered that the vice question case there is no serious that Aet- president systematically siphoned off na was misled the nondisclosure of a through bogus bank assets loans he had major potential claim. It endorsed. was determined that at the duty pending A to disclose simply claims time applied for the vice ensures that will meeting there be a true president $42,000 had endorsed over worth expectation the minds. If Home’s was that of valueless loans. The insurer claimed loss, any, would be cover- bank not could recover because the bank policy, charged ed and if Aetna a did not disclose the endorsements in the premium a based on belief that there were application. rejected argu The court already no pending claims that would ment, need reasoning that the information could policy, be covered under the then not there be deemed material the insurer be meeting was no cause no such of minds. If there was information was re ever quested application. meeting minds, In no could the Howard there be no however, case, coverage. there was no indication did majority’s conclusion Home therefore not suffer accept actual I do “re-, would it had requiring very a rule disclosure loss when fact received the applicant proceeds to affirmative- quire an insurance loan it claimed were lost. issue the an insurer to not ly convince majority erroneously The dismisses Aet- The that there is a applied-for policy.” fact na’s claim because it mischaracterizes a pending against the insured is “ma- claim liability offset issue as upon fact” which an insurer is “clear- terial jury have par- should determined. The it to be informed before could ly entitled expressly ties reserved the determination intelligently decide whether under ex- damages trial court. Whether it would isting conditions assume risk there offset directly is an relates imposed upon to be damages, issue of the amount not to Fin. 61 P.2d at West Am. bonds.” liability. issue of In order for the trial pending claims disclosure determination, court to make such it must meeting of the simply facilitate a would consider claimed offsets. The trial policy, As of public minds. a matter we claim, however, court declined hear the encourage full should disclosure rather felt the questions because it issue involved permit party to from its than benefit own properly jury. of fact reserved for the silence. court, along major- trial with Home and the “omissions,” By including the term sec- ity, identify any questions failed to 31-19-8(1) merely tion codifies this contrac- jury fact needed to determine be- duty. I principal statutory tual as a would court fore the trial could have addressed therefore hold that Home’s failure dis- fact, claim. there is factu- offset pending duty lawsuit close the violated dispute happened al as to what to disclose all facts material to hazard proceeds. issue was whether Aet- by Aetna therefore bars assumed na was to an offset as a matter of entitled seeking recovery Home from under the jury findings law. Since no were needed to legal ruling, perfectly make it was logical acceptable for Aetna to wait V. OF DAMAGES OFFSET pursue jury after the offset claim entering Before into the loans with the special its had rendered verdicts and borrowers, granted Home had a loan to trial court had found Aetna liable. To Affleck, however, directly. Affleck/AFCO jury to the addressed the offset issue repaying not the loan. Home there- since would have been fruitless there Affleck fore instructed that once bor- dispute. no factual him, gave proceeds loan to he rowers as the court refused to Inasmuch trial immediately proceeds was to return the to even the offset issue because address payment original Home as his loan. erroneously duty viewed it as the place Home even went so far as to restric- jury, issue should be remanded tive endorsements on of the loan back consideration the trial court. thereby preventing proceed checks Affleck guaranteeing cashing the checks and proceeds the return of the Home. Aetna VI. CONCLUSION by requiring to use claims Affleck Any incurred loss Home was discover- already proceeds pay off his de- loan place. D ed while the F & bond was loan, effectively faulted Home shifted the cover Aetna was never intended to loss it was bound incur under Affleck’s inception employees that were known loan borrowers’ loans. Since The Aetna bond to have been dishonest. the Affleck loan not have would pending claims known bond, also did not cover covered Aetna claims it been inception Home but offset entitled to the amount before application. to Aetna in the sought the amount of loan disclosed not, therefore, actually required proceeds returned Home. should indemnify Home for its loss in the Armi-

tage case.

Dennis J. RICHINS and Suesann

Richins, Plaintiffs and

Appellees, CO., INC.;

DELBERT CHIPMAN SONS Ray Chipman, individually,

and D. De- Appellants,

fendants and Porter; Porter;

Richard Kenneth through John Does Appellees.

Defendants and

No. 900134-CA. Appeals

Court of of Utah.

Aug. an order notes Following ed effective December void, mortgage and second trust deeds departure, Home closed several Glad’s barring order the financial institutions an in- loans to AFCO mortgage more second demanding repayment involved vestors. loans made to the AFCO investors.1 28, 1982, January AFCO issued On Board The Federal Home Loan Bank con- Home, applied toward the check to of Home which indi- ducted examination monthly payments due on the AFCO first 4, 1982, Home cated that as of June Although contrary loans. investor already scheduling mortgage the second accept third-party policy usual being loans as at risk. The examiner con- loans, in- repayments of its AFCO and its

Case Details

Case Name: Home Savings & Loan v. Aetna Casualty & Surety Co.

Court Name: Court of Appeals of Utah

Date Published: Aug 6, 1991

Citation: 817 P.2d 341

Docket Number: 890101-CA

Court Abbreviation: Utah Ct. App.