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Zurich Insurance Company v. Continental Insurance Company6/19/2000
Unpublished
Zurich Insurance Company sought contribution from the respondents, Continental Insurance Company and Boston Old Colony Insurance Company, contending they had a common obligation to defend and indemnify their insureds on defamation claims that had been asserted against them. Following motions for summary judgment, the trial court found that the respondents had no duty to defend or indemnify the insureds and dismissed Zurich's claims. After reviewing the record and the arguments presented, we find that the claims against the insureds arose out of activities that were not covered by the respondents' policies. Therefore, we conclude that the trial court did not err in dismissing Zurich's claims for contribution, and we affirm.
FACTS
This coverage dispute arose from litigation between the owners of and investors in Triple Crown winner Seattle Slew. In 1975, Karen and Mickey Taylor formed Wooden Horse Investments, Inc. (WHI), to purchase thoroughbred horses, which the Taylors managed through a second company, Pearson's Barn, Inc. When one of WHI's horses, Seattle Slew, won the 1977 Triple Crown, WHI syndicated the horse, selling ownership shares that carried annual breeding rights. WHI retained a 50 percent interest in the horse, selling the remainder for $6 million. The Taylors also formed a partnership, Seminole Syndicate, through which they and other investors purchased mares to breed to Seattle Slew. Leslie Powers, the Taylors' attorney, became an investor in Seminole and later continued his representation of the Taylors and their business entities through his practice with another lawyer, Keith Therrien.
After Seattle Slew produced WHI's first successful crops, including two colts that were syndicated for $12 and $16 million each, Powers, Therrien, and the Taylors created approximately 15 investor partnerships to market breedings to outside investors. Powers and Therrien also assisted the Taylors in forming Thoroughbred Finance Corporation (TFC) to finance the investor partnerships' activities. The Taylors continued to manage the racing and breeding careers of WHI's horses through Pearson's Barn, in addition to managing the breeding ventures of the other entities they had created.
In 1992, one of WHI's investors sued the Taylors in federal district court in Kentucky, alleging that Mickey Taylor had looted the business. The Taylors responded and filed a third party complaint against Powers and Therrien in which they claimed the attorneys had improperly represented the racing entities, despite conflicts of interest, and seized control of TFC. The Taylors' claim against Powers and Therrien was later dismissed for lack of jurisdiction, and a judgment was ultimately entered against Mickey Taylor, individually and as trustee for Pearson's Barn and its investors, in excess of $4.2 million.
Before the judgment was entered, the Taylors petitioned the superior court in Yakima to dissolve WHI and adjudicate an involuntary bankruptcy against TFC. Powers and Therrien then filed suit against the Taylors for outstanding legal fees. In April 1993, the Taylors filed a counterclaim, reprising many of the allegations they had raised in the Kentucky suit. The litigation between the parties was later consolidated, and in February 1994, Powers and Therrien filed 20 counterclaims against Pearson's Barn, WHI, the Taylors, and others, triggering the coverage action in this case. Powers and Therrien claimed that Mickey Taylor committed misrepresentation, fraud, a breach of fiduciary duties, and concealment in his management of Seminole through Pearson's Barn. Powers asserted rights based on his interest in Seminole and based on an agreement to redeem th
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