According to the Courthouse New Service, the law firm knew they were hiring a secretary with a propensity to embezzle (image, Janet Leigh, the greatest fictional embezzling secretary); and, as a consequence the Bar Association insurance carrier denied liability. This is an excerpt form the CNS stroy:
Oregon State Bar says its Professional Liability Fund should not have to cover a law firm that hired a secretary with a history of theft who forged checks and embezzled $150,000 from an estate.
The Oregon State Bar Professional Liability Fund sued the Williamson & Williamson law firm and the estate involved in the alleged embezzlement, in Multnomah County Court. The Bar says it does not owe coverage to the Williamson firm because it knew the secretary had a history of theft.
In 2002 the Williamson firm represented the estate of Marjorie Hope Morton in a probate action in Columbia County.
In March 2010, an attorney for the Morton Estate told the Oregon Bar that Shirley Paul, a legal secretary for Williamson & Williamson, had embezzled more than $150,000 from the estate's checking account, according to the complaint.
That letter "was the first written notification ever provided to the PLF, by anyone, concerning Paul's embezzlement of funds from checking accounts handled by and/or in the possession of Williamson & Williamson," the complaint states.
In July 2010, the estate's trustee Roy Rogers sued Williamson & Williamson for legal malpractice and breach of fiduciary duties in Multnomah County.
In that action, Rogers said Paul had "forged checks and embezzled funds from the Estate by making out checks payable to herself, forging the signature of an authorized signer, negotiating the checks, and keeping the proceeds or converting them to her own use."
Rogers said he did not know about the embezzlement until Paul herself contacted him from prison, in February 2010. He said the Williamson firm should have supervised and reviewed the checks she wrote.
In November 2010, the Columbia County Court executed an escrow agreement on the coverage dispute. In January this year, the PLF "advanced funds in the amount of $184,054.00, in full and final settlement of the Morton-related claims" from the underlying action, which it says resolved all claims by the estate.
The Williamson estate denied a claim submitted by the PLF, which led to the current lawsuit.
"Through this action, the PLF does not seek reimbursement of the defense costs it incurred to provide a defense in the underlying action," the complaint states. "Instead, the subject at issue in this action is whether or not the PLF has any duty to provide indemnity to any covered party under the applicable PLF Plan for the Morton-related claims."
The PLF says it does not owe the Williamson firm any legal duty because it knew that Shirley Paul had a history of theft and embezzlement since at least 2000. It says the firm also knew Paul had a gambling habit.
"After her thievery and established pattern and practice of dishonesty involving checks was first discovered, Paul again was provided access to checkbooks and entrusted to resume her management of checking accounts handled at the law firm," according to the complaint.
Because the firm knew of Paul's history of theft, the loss of money "was no longer unexpected or fortuitous and, therefore, ceased to constitute an insurable or contingent risk of liability or loss that could be insured," the Bar says.
Insurance policy language is written by insurance companies in a manner intended to permit insuarnce companies to deny coverage in many instances. We have talked about this previously, and we will revisit the subject soon.