Opinion ID: 182335
Heading Depth: 3
Heading Rank: 2

Heading: Dishonesty Exclusion

Text: Exclusion number 11 provides that KBS shall not be liable to make payment or provide any defense in connection with any claim for Loss against a Director brought about or contributed to by the dishonesty of the Directors. . . . This exclusion shall not apply to any protection provided for any Director . . . under the terms of this policy who was not involved in the dishonest acts. (Add. tab 1 at 15.) The district court applied a similar analysis to the dishonesty exclusion as it did to the personal profit exclusion, looking at the allegations in the indictment to determine whether the exclusion was triggered, and concluded that [c]learly the dishonesty exclusion applies in this case (Add. tab 3 at 26) because counts 4 and 6 alleged that Wintermute acted with the intent to defraud and counts 7 and 8 alleged bank fraud. Notably, the district court did not discuss the last sentence of the exclusion, which makes the exclusion inapplicable to a director not involved in the dishonest acts. We conclude that the last sentence of the dishonesty exclusion serves the same purpose as the in fact language contained in the personal profit exclusion. The last sentence must be given some meaning, see Travelers Indem. Co., 764 S.W.2d at 599, and by its ordinary language, it makes the dishonesty exclusion inapplicable if the specific director was not actually involved in the dishonest acts. Thus, it is not enough that the criminal indictment charged Wintermute with committing fraud. Material fact disputes exist concerning whether Wintermute was involved in the dishonest acts alleged, particularly in light of her acquittal on those counts. Cf. Polychron, 916 F.2d at 464 (noting the policy did not exclude attorney's fees incurred in defense of a criminal matter, at least where the insured is acquitted). The district court therefore erred in granting summary judgment to KBS under the dishonesty exclusion based solely on the allegations contained in the criminal indictment.