George P. Bowie William L. Gregory v. The Home Insurance Company New England Insurance Company

George P. Bowie and William L. Gregory brought this diversity action in California against Home and New England Insurance Companies, insurers of a corporation for which they were directors, for failure to defend and indemnify them with respect to an action against them and others for alleged errors and omissions committed as officers and directors of another company. Finding that Bowie and Gregory were not insureds under the Home and New England policies, the district court dismissed for failure to state a claim. Bowie and Gregory appeal.

I.

Bowie and Gregory were former officers and directors of Transit Casualty Company (Transit). During the same period they were directors of DMT Financial Group (DMT). DMT, its officers, and its directors were insured under an errors and omissions policy issued by The Home Insurance Company. New England Insurance Company (along with Home, “the insurers”), as excess carrier, adopted the terms and conditions of the Home policy.

In January 1980, Transit’s officers and directors implemented a Risk Management Plan under which Transit “fronted” insurance policies under its name. To facilitate this operation, various Managing General Agents were…