Miller v. Westport Ins. Corp.

Miller v. Westport Ins. Corp.

Opinion

 [*28]  [**421]   The opinion of the court was delivered by

BEIER, J.: This is a contract case involving an insurer's duty to defend on an errors and omissions policy.

Plaintiffs Richard Miller, Ed Zeller, and Jeremy Kohn are licensed life, accident, and health insurance agents who referred several of their clients to John F. Usher and Associated Financial Solutions, Inc. (Associated), a company offering debt adjustment services. Usher, the owner of Associated, absconded with  [***4] the clients' funds while he was under investigation by the Kansas Attorney General's office. Miller, Zeller, and Kohn made claims under their professional errors and omissions insurance policies with defendants Westport Insurance Corporation (Westport) and Employers Reinsurance Corporation (Employers). Coverage was denied. The agents settled with their clients and again sought coverage. Again, they were unsuccessful; and they then filed this action. The district court granted the insurers' motion for summary judgment, and a panel of our Court of Appeals affirmed in Miller v. Westport Ins. Corp., 151 P.3d 864, unpublished opinion filed February 16, 2007. We granted the agents' petition for review.

We address the one question dispositive of this appeal: Did the lower courts err in concluding that insurers Westport and Employers had no duty to defend agents Miller, Zeller, and Kohn?

 [*29]  Factual and Procedural Background

Miller has his own business, T & M Financial, Inc. (T & M), and Zeller and Kohn work with T & M as independent contractors. All three men are agents who sell insurance for Woodmen Accident and Life Insurance Company. Woodmen requires its agents to investigate clients' needs and  [***5] financial ability, and it prohibits its agents from selling insurance that a client does not need or cannot afford.

In the course of their business, the agents referred certain clients to Associated, a nonprofit debt-adjustment organization, to enable the clients to pay insurance premiums and fund their purchase of other insurance products. The agents chose Associated because it was the only company that guaranteed its services would not have a negative impact on clients' credit ratings. The agents did not receive compensation for these referrals. They continued to refer clients to Associated for approximately 1 year before the agents' clients complained that their debts were not being discharged and that they could not get in touch with Associated.

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