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General Accident Ins. Co. v. West American Ins. Co.1/31/1996
WALLIN, J.
General Accident Insurance Company filed a declaratory relief action against Aetna Casualty & Surety Company and West American Insurance Company, seeking a declaration of coverage and reimbursement for defense and settlement costs it incurred while defending a complaint tendered to all three insurers. Aetna and West American refused the tender of defense of the underlying complaint. General Accident not only accepted the tender from its insured, but agreed to defend the insureds of Aetna and West American under an assignment of their rights against their insurers; it also contributed to the settlement on behalf of the insureds of all three carriers. Summary judgment on the declaratory relief action was granted in favor of Aetna and West American, and General Accident appeals on the duty to defend issue only. We find a duty to defend as a matter of law and reverse.
On April 11, 1989, Donald Owens filed a complaint for damages against, among others, Sportsman Associates, Inc. (SAI), Hall & Powell Insurance Services, Inc. (H&P;, and Sportsman, Hall and Powell, Inc. (SHP). Owens alleged that in 1983, he was president and part owner of an insurance agency known as the Escondido agency. In November of that year, he sold the agency to Glenfed Insurance Services and stayed on as its manager. In April 1988, Owens was approached by certain of the underlying defendants with a proposal that he join with H&P;and SAI in an insurance business venture. Owens and the defendants agreed: (1) Owens would repurchase the Escondido agency from Glenfed; (2) a new corporation, SHP, would be formed to acquire and operate the agency, and the owners of SHP would be Owens, SAI and H&P; and (3) Owens would serve SHP as its president and be employed by it as the manager of the Escondido agency.
In June 1988, Owens purchased the Escondido agency with a down payment of $44,000 provided by defendant Murray Sportsman and signed a promissory note for the balance of the purchase price, $220,000. Among the assets Owens received in the purchase was Glenfed's lease of the premises occupied by the agency. Thereafter, Owens operated the agency as its manager.
In November 1988, SHP had its first formal meeting at which Owens was elected president, and shares of common stock were issued in the amounts of 325 shares to SAI, 325 to H&P; and 70 to Owens. Contrary to their previous representations, however, SAI and H&P;failed to cause SHP to acquire the assets of the agency or to assume the lease from Owens.
On January 20, 1989, Owens was summarily terminated as manager of the agency and as president of SHP. After that date, the underlying defendants "privately, for their own benefit and refusing to allow the participation of Owens, operated the Escondido agency in the following manner: (a) Occupying the premises leased to Owens; (b) Employing the files and records of the Escondido agency purchased from Glenfed and owned by Owens; (c) Contacting the agency's clients and advising the insureds that [SHP was] the owner of the agency and that Owens was no longer associated with the business; and (d) Receiving the income from the agency and disbursing the same as funds owned by said defendants."
Based on these allegations, Owens stated the following causes of action against the defendants: wrongful termination, breach of the covenant of good faith and fair dealing, breach of fiduciary duty, interference with contractual relations and interference with prospective economic advantage. Regarding the continued operation of the Escondido agency by the defendants, Owens sought the remedies of constructive trust, accounting, appointment of a receiver and in
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