Bank of California, N. A. v. W. H. Opie, California Union Insurance Company

This case concerns the liability of an errors-and-omission insurer of a mortgage banking corporation for losses due to the corporation’s failure to apply properly the proceeds of loans secured for its normal business purposes from a commercial bank.

W.H. Opie & Company (Opie) borrowed money from the Bank of California (Bank) for operating expenses in connection with its mortgage-banking business, but violated the loan agreement as to the proper application of the funds. Opie was found liable for damages in state court, and the Bank commenced the present garnishment action against California Union Insurance Company (Union), Opie’s errors-and-omissions insurance carrier. The action was removed to federal court on diversity. The district court granted summary judgment in favor of the Bank, holding that, under Washington law, Opie’s liability to the Bank arose “by reason of [an] act, error or omission in professional services” within the meaning of Union’s policy. Because we agree with the district court that Union’s policy covered Opie’s conduct and that summary judgment was appropriate, we affirm.

I.

Facts

Opie entered into a series of financial transactions with the Bank to…