Sherwood & Roberts-Kennewick, Inc., a Washington Corporation v. St Paul Fire & Marine Insurance Company, a Minnesota Corporation

Sherwood & Roberts-Kennewick, Inc., a Washington corporation, hereinafter referred to as appellant, filed an action in the United States District Court for the Eastern District of Washington against St. Paul Fire & Marine Insurance Company, a Minnesota corporation, hereinafter appellee, to recover damages under a Mortgage Bankers Blanket Bond purchased by appellant from appellee. The bond provided in part that appellee “undertakes and agrees to indemnify the insured, and their successors and assigns, all such losses not exceeding $250,000 * * * (1) By Reason of the fraud, dishonesty, forgery, theft, larceny (whether common law or statutory), embezzlement, wrongful extraction or misappropriation, or any other dishonest, criminal or fraudulent act, of any officer, clerk, servant or guest student' of the Insured wherever committed and whether committed directly or in connivance with others.”

The complaint alleged that losses were incurred by reason of the dishonest or fraudulent acts of Robert D. Chamberlin, a vice-president of appellant and general manager of appellant’s operations in Pasco, Kennewick and Richland, Washington, particularly those acts committed in connivance with…