Missouri Federal Court Holds that “Accident” Did Not Include Claims for Breach of Contract, Unjust Enrichment, or Fraud

A federal court in Missouri has ruled that claims of breach of contract, unjust enrichment, and fraud against a company and its owner did not involve any undesigned, sudden, or unforeseen event that could be considered an “accident” or “occurrence” for purposes of finding coverage under a business owner’s liability insurance policy.

The Case

PJP Enterprises sued Omicron Capital and its owner, Richard Saddler, in Wyoming state court. PJP alleged that Omicron and Saddler had held themselves out as loan brokers and that PJP had entered into a contract with Omicron under which Omicron had agreed to assist PJP in finding financing for its business. PJP alleged that under the terms of the contract, PJP had wired $75,000 to Omicron to be held in escrow to pay for third-party services to be performed in connection with arranging the financing. PJP also alleged that under the terms of the contract, the $75,000 was to be returned to PJP in the event that the contract was terminated and the funds had not been used to pay for third-party services for PJP.

PJP alleged that Omicron had not used the $75,000 for third-party services, that Omicron had failed to provide financing for PJP, that PJP had terminated the contract, and that Omicron had improperly refused to return any of the $75,000. PJP further alleged that after it had demanded return of the money, Omicron and Saddler had intentionally forged and changed a copy of the contract by removing the provision stating that the $75,000 was refundable and adding a provision stating that Omicron would be paid the $75,000 even if it failed to provide financing. PJP asserted claims of breach of contract, unjust enrichment, and fraud against Omicron and Saddler.

Country Mutual Insurance Company, which had issued a business owner’s liability insurance policy to Omicron and Saddler, sought a declaration that its policy did not provide coverage for any of the allegations contained in the PJP lawsuit.

Country Mutual moved for summary judgment.

The Court’s Decision

The court granted Country Mutual’s motion.

In its decision, the court found that the allegations in the PJP lawsuit did not involve any undesigned, sudden, or unforeseen event that could be considered an “accident” or “occurrence.” The court said that the first two claims in the PJP lawsuit – breach of contract and unjust enrichment – were based entirely on the alleged breach by Omicron and Saddler of their defined contractual duty to return the $75,000 to PJP. Omicron and Saddler’s alleged nonperformance of that contractual duty was entirely within their control, the court noted, and could not be described as an “accident” or as an “occurrence” under the policy.

Moreover, the court found that the allegations in PJP’s third claim – fraud – also did not involve an “occurrence.” As the court pointed out, that claim was based on the allegation that Omicron and Saddler had intentionally forged a copy of the contract to avoid performing their contractual duties. “Such acts of intentional wrongdoing and fraud,” the court ruled, were “not ‘accidents’ within any reasonable meaning of that term” and, therefore, were not “occurrences” within the meaning of the policy’s coverage provisions.

The case is Country Mut. Ins. Co. v. Omicron Capital, LLC, No. 4:13-cv-1476-SPM (E.D. Mo. April 27, 2015).