Desert Empire Bank, Etc. v. Insurance Co. Of North America, Etc.

In October 1973, the Insurance Company of North America (INA) extended insurance coverage to the Desert Empire Bank (DEB) under “Banker’s Blanket Bond No. S725542” and “Bank Employee Dishonesty Blanket Bond No. S796699.” In general terms, these bonds provided coverage to DEB for any dishonest, fraudulent or criminal acts that were committed by any of the Bank’s employees and that were discovered during the period of the bond coverage. INA renewed the bonds first on October 1, 1974, and again on October 1, 1975; then, on or about December 8, 1975, INA sent DEB a notice of cancellation. INA listed the effective date of cancellation of Bond No. S796699 as February 9, 1976, and the effective date of cancellation of Bond No. S725542 as February 13, 1976. Although DEB acknowledged receipt of INA’s cancellation notice, DEB alleged that E. Ronald Schulte, an authorized agent of INA, had informed DEB on January 22,1976, that he had submitted an application for blanket bond coverage to the St. Paul Fire and Marine Insurance Company on DEB’s behalf, and that INA had agreed to keep its bonds in effect until DEB had obtained coverage from another carrier.

The present action arose when DEB…