Fidelity National Title Insurance Company approved attorney Renee Snead to handle mortgage closings, including authorizing her to issue Insured Closing Services Protection (ICSP) Letters to home lenders. After receiving the Fidelity position, Snead bought a professional liability policy from OHIC Insurance Company.

Fidelity sued Snead because of two events involving funds. Snead sent required ICSP letters to both Century Mortgage Corp. and to Equifirst Corporation. Fidelity issued the letters and sent funds to Snead's trust account so that closing and other related costs for Century and Equifirst would be handled. Those funds were never used for the Century and Equifirst closings. A closing debt due under the Century transaction went unpaid and the Equifirst closing fell through, but Snead did not return the funds that Equifirst has previously sent in anticipation of their closing costs. Equifirst and Century sued Fidelity for the missing funds. Fidelity settled the losses and then filed a lawsuit against Snead's firm.

Upon review of the matter, it turns out that the deposited funds had been stolen by one of Snead's employees and, apparently, without any involvement or knowledge of Snead. Snead's professional liability insurer, OHIC, denied the claim, basing their decision on the grounds that the policy excludes coverage for misappropriated funds or similar acts. Fidelity disagreed with OHIC's position. It asserted that the exclusion was inapplicable because Snead was not involved in the misappropriation. Both parties filed summary judgments. The trial court held the opinion ruled that the parties needed to determine whether Snead was involved in the theft of the funds. It also held that, if Snead was innocent of any involvement, that coverage existed under the policy. The court denied both summary motions and both companies appealed.

The appellate court considered the arguments made by Fidelity and OHIC. Fidelity also added an allegation that ambiguity existed because two other policy exclusions contradicted the provision that barred coverage for misappropriation or conversion of funds. Fidelity pointed out that the other exclusions, which both addressed losses involving broader criminal acts, contained exceptions. They provided coverage in the case of innocent insureds. Fidelity maintained that the innocent insured exception should apply to Snead.

The higher court reviewed the information at hand as well as a number of relevant cases. In its opinion, Fidelity's allegations could not be supported. The court held that the only proper reading of an exclusion is to apply it directly to an insuring agreement and not weigh it against other, separate exclusions. In its opinion, the OHIC policy unambiguously barred coverage for any incident that involved the misappropriation or conversion of funds entrusted to an insured. Therefore, the court did not agree with the trial court position that an issue of fact needed to be heard. In light of its review, the court affirmed the lower court's denial of Fidelity's motion, but reversed the decision on OHIC's motion, agreeing with the insurer's position that the loss was excluded.

Fidelity National Title Insurance Company Of New Yourk v. OHIC Insurance Company. Georgia Court of Appeals, Third Division. Nos. A05A1179 and A05A1180. Filed July 29, 2005. Affirmed in part and reversed in part. CCH Personal and Commercial Liability Cases Paragraph 24,015.