General Accident Insurance Company v. Mary Lou Namesnik, and Robert and Cornell Whitlow

General Accident Insurance Co. brought this declaratory judgment action against Mary Lou Namesnik and Robert and Cornell Whitlow to determine whether it is required to defend a tort action in legal malpractice initiated by Namesnik and the Whitlows against Harry Pappas, an attorney. The district judge granted summary judgment for General Accident, finding that the conduct complained of is not covered by the provisions of the contract of insurance.

STATEMENT OF THE CASE

Harry Pappas is an attorney and Certified Public Accountant licensed in Arizona. From approximately 1975 to 1982 Pappas had an attorney-client relationship with Namesnik and from 1978 to 1982 with the Whitlows. During those times Pappas acted as attorney for both parties, preparing tax returns and handling other routine tasks. This dispute centers around various investments which Pappas recommended to Namesnik and the Whitlows. The investments were capitalizations by Namesnik and the Whitlows of corporations or partnerships which Pappas formed and operated. In each of these, Pappas solicited funds and performed the legal work for the entity. The investments resulted in losses approaching the millions of dollars,…