Fraud victim wins garnishment motion against Citizens Insurance

In Paylor v. First Mountain, et al., a homeowner who lost his home to the fraudulent conduct of two mortgage brokers was able to collect his fraud verdict from the insurer of their employer.  The Court of Appeals first noted that while not a third-party beneficiary of the insurance contract, the victim was also not "in privity" with the insured and therefore not bound by a declaratory judgment action between the insurer and insured:  since he wasn't joined in the action and since his interest was adverse to both of the parties, the decision in that action was not binding upon him.

The Court then rejected the argument that the victim had suffered a "bodily injury", but found that in losing his home and becoming dependant upon his children, he had suffered the "humiliation" which helped to define a broadened "personal injury" under the Citizens policy.  On that basis, the insurer's policy covered his injury.  In an essential subordinate holding, the Court also noted that under the policy language, "the insured"--used in the singular--could only refer to the corporation involved, and not to all of the insured individuals.

In a separate opinion issued the following day in the companion case of First Mountain v. Citizens, the Court of Appeals reversed the trial court's holding that First Mountain's losses were covered under Citizen's "employee dishonesty" coverage and also took away First Mountain's award of attorney fees.