Liberty Mut. Ins. v. HARRIS, KERR, FORSTER

Opinion

GUSTAFSON, J.

American Institute of Aeronautics & Astronautics, Inc. (hereinafter referred to as the insured), protected itself from any loss caused by the dishonesty of an employee by contracts with Liberty Mutual Insurance Company (for the period March 11, 1963, to March 11, 1966) and General Insurance Company of America (for the period March 11, 1966, to January 1, 1968) whereby the insurers agreed to indemnify the insured for any loss due to the dishonesty of an employee.

The insured suffered a loss of $113,442.99 by the dishonesty of one of

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its employees, $38,861.59 of the loss being incurred while a contract was in force with one of the insurers and $74,581.40 of the loss being incurred while a contract was in force with the other insurer. Upon refusal of the insurers to indemnify the insured, the insured brought suit against the insurers.

The insurers answered denying liability, but each filed a cross-complaint (superseded by a first amended cross-complaint) against Harris, Kerr, Forster & Company (hereinafter the accountants) seeking declaratory relief in the form of a judgment that if the insurer is liable to the insured, the accountants are liable to the insurer. A demurrer to each of the first amended cross-complaints was sustained without leave to amend, the first amended cross-complaints were dismissed (Code Civ. Proc., § 581) and this appeal is taken from the written order of dismissal which is a judgment. (Code Civ. Proc., § 581d.)

The first amended cross-complaints allege that the accountants negligently audited the books of the insured, that if the accountants had exercised ordinary care in the auditing of the books of the insured the dishonesty of the employee would have been discovered by the insured in time to prevent or drastically reduce the insured’s loss and that by reason of the insured’s rehance upon the accountants the defalcations of the employee were not discovered until August 24,1967.

Although some of the allegations in the first amended cross-complaints indicate that relief is sought from the accountants for breach of a duty owed to the insurers, we need not decide whether a cause of action has been stated on that theory because the insurers expressly disclaim in their briefs in this court that they are seeking recovery on that basis. Instead, assert the insurers, they are through the declaratory relief action proceeding on “a sort of ‘presubrogation’ ” theory.