Crime/Fraud Exclusion

Criminal Conduct Defeats Claims on Malpractice Policy

Lawyers are expected to serve the interests of their clients. When they do the opposite, steal from their clients, they are not worthy of acting as a licensed attorney, and if convicted of a crime of moral turpitude, they must lose their license. The victims of a crooked lawyer can sue him and seek to recover from his malpractice insurer. However, most such policies contain a crime/fraud exclusion.

In Oklahoma Attorneys Mutual Insurance Company v. David A. Cox, Christopher Mansfield; Gayle Boyle; Sharon C. Hart; Kathryn R. Stewart; Jim Mcgough; Catherine Welsh, 2019 OK CIV APP 25, Case Number: 117480, Court of Civil Appeals of the State of Oklahoma, Division I (Mandate Issued: May 1, 2019) the court was asked to determine if, under the facts of the case, defeated a claim for coverage.

Plaintiff/Appellee Oklahoma Attorneys Mutual Insurance Company (Insurer) sought declaratory relief with regard to a former attorney, Defendant Christopher Mansfield (Mansfield), and some of his former clients (collectively “Defendants”), including Defendant/Appellant David A. Cox (Cox). Finding no factual dispute, the trial court granted Insurer’s motion.


Mansfield was previously licensed as an attorney in the state of Oklahoma. The Oklahoma Bar Association filed a complaint against Mansfield, alleging misconduct by Mansfield with regard to his management of, among others, the Cox Estate. Adopting the recommendation of the Professional Responsibility Tribunal, the Supreme Court of Oklahoma found that Mansfield violated the Oklahoma Rules of Professional Conduct by diverting funds from the Cox Estate without authorization. Mansfield entered into agreed judgments in at least five disputes regarding other estates he defrauded, totaling in excess of $1 million in judgments against him. The Supreme Court avoided the need to disbar Mansfield who accepted Mansfield’s resignation from the Oklahoma Bar.

The United States brought criminal charges against Mansfield for his conduct in managing one of the estates, alleging bank fraud and unlawful monetary transaction. In response to the charges, Mansfield pleaded guilty and agreed to a forty-one-month prison sentence. A criminal judgment was entered against Mansfield March 16, 2017.

Cox filed suit against Mansfield September 12, 2014, alleging negligence, gross negligence, breach of duty by personal representative, deceit/fraud, unjust enrichment, and seeking punitive damages. The Cox suit is ongoing.

Prior to the allegations of misconduct Mansfield had purchased a “Lawyers Professional Liability Claims-Made Policy” from Insurer for the period of July 13, 2013 to July 13, 2014 (Policy 1). Policy 1 was canceled when Mansfield’s law license was suspended. Mansfield then purchased a “Three Year Extended Reporting Endorsement” beginning June 1, 2015 (Policy 2). Insurer was notified of the Cox suit during Policy 1, and of the McGough suit during Policy 2 (hereinafter referenced jointly as “the Policies”).

The insurer sued Mansfield seeking a declaratory judgment that it has no duty to defend or cover Mansfield in the Cox or McGough suits. The insurer moved for summary judgment alleging there was no dispute as to material fact and it was entitled to judgment as a matter of law.

The insurer asserted the “crime/fraud exclusion” in the Policies defeated coverage. The trial court granted summary judgment in favor of the insurer. Cox appealed.


The sole question on appeal is whether the trial court erred by granting summary judgment and holding that Insurer was entitled to judgment as a matter of law because Cox’s claims were excluded from coverage under the crime/fraud exclusion in the Policies.

In Oklahoma, the guiding principle in an insurance coverage dispute is that an insurance policy is a contract. Accordingly, the parties to the contract may agree to such terms as they see fit and the court is not at liberty to rewrite those terms. The terms of an insurance policy should be construed according to their plain meaning, so long as the language is not ambiguous and the construction does not bring about an absurd result. An insurer may limit its own risk via the terms of the policy. An “exclusion” is a policy term eliminating coverage where it otherwise would have existed under the general declaration.

The “Insuring Agreement” stated a broad agreement to protect Mansfield subject to conditions and exclusions. Insurer alleged that Mansfield’s conduct giving rise to the claims falls under the crime/fraud exclusion. This exclusion states that the Policies do not apply “to any claim arising out of any dishonest, fraudulent, criminal, malicious or knowingly wrongful act or omission…”

The court concluded that the language of the crime/fraud exclusion is not ambiguous on its face. In order to withstand summary judgment, Cox needed to present evidence indicating he sustained damages from Mansfield’s negligent conduct which are separate from those sustained as a result of Mansfield’s fraudulent and/or criminal conduct.

The evidence presented at summary judgment failed to demonstrate that Cox suffered an injury from Mansfield’s conduct that was separate from that which has been deemed fraudulent or criminal by the suspension of Mansfield’s law license and his criminal conviction. In his petition in the Cox suit, Cox alleges that Mansfield negligently mismanaged the Cox Estate, breached his duty as personal representative by failing to act in the best interest of the Estate, and was unjustly enriched in his role as personal representative.

In rendering judgment, the criminal court ordered that Mansfield pay restitution to the other victim estates, including $5,225.53 to the Cox Estate.

These findings of professional culpability and criminal guilt by the Oklahoma Supreme Court and the federal court are highly probative on the issue of whether Mansfield’s conduct giving rise to the Cox suit comes within the purview of the crime/fraud exclusion in the Policies.

In order to withstand summary judgment, Cox needed to present evidence that would show that he suffered a harm separate from that incurred as a result of the conduct for which Mansfield was disbarred and criminally convicted, i.e. that Cox was harmed from some negligent conduct apart from his conversion of estate assets. Cox made no such showing, and instead relied solely on his own allegations and the findings in the aforementioned proceedings against Mansfield. Cox therefore did not meet his burden.

Because the record fails to indicate that the claims in the Cox suit arise from conduct separate from that which has already been deemed knowingly wrongful or criminal, Cox’s claims are excluded from coverage under the crime/fraud exclusion in the Policies.


There is no way that an insurer should, if there is to be justice, be required to pay for the criminal and fraudulent acts of the lawyer insured. The injured parties are not without a remedy, they can sue and take all of the assets the lawyer gained from his criminal conduct or be indemnified by orders of restitution from the criminal court. The insurer, who did not agree to insure against the criminal acts of the lawyer insured, was forced to protect itself with a declaratory relief action, that should have been – and was – obvious to the trial and appellate court.

© 2019 – Barry Zalma

This article, and all of the blog posts on this site, digest and summarize cases published by courts of the various states and the United States.  The court decisions have been modified from the actual language of the court decisions, were condensed for ease of reading, and convey the opinions of the author regarding each case.

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant  specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 50 years in the insurance business. He is available at and

Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.

Over the last 51 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

“Arson-For-Profit Fire at the Cowboy Bar & Grill”

A true crime novel based on the experience of the author, Barry Zalma, who for more than 51 years has acted for insurers who were faced with arson-for-profit, one of the most dangerous insurance fraud schemes. The book explains how an insurance claims adjuster, working with a fire cause and origin expert, a forensic accountant and insurance coverage lawyer, were able to defeat an arson-for-profit scheme and obtain a judgment requiring the perpetrator to take nothing and repay the insurer all of its expenses in defeating the claim.

Available as a paperback.

Available as a Kindle book.



About Barry Zalma

An insurance coverage and claims handling author, consultant and expert witness with more than 48 years of practical and court room experience.
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