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APA 111t 2013
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<br />and the prior app[lcafion, the District answer i *nog to the question at Sadjon E.61 "Mm
<br />intomaf control system destned so that no employee can control a pro from
<br />beginning to eild (e.gregrae t a Check,a;ppruve a voualaar and sign the eheck)r
<br />Hartford xfid riot follow up on this, either. Haftrd was aware sof the District's lade of
<br />contrcf systems designed to prevent the exact type of schem that Seeney and Stniparta
<br />ire able to perpetrate. Aoocrdfngly, Naftrd oarinot provva ftt the District
<br />rrrisrepresented the safagtaards in place, or that this was material to the decialon to
<br />issue tho polEy,
<br />;�lartford ar-9ves that 66aonay's wind Sfn[paWs knowledge of their own wroragdoln�g
<br />shouM be imputed to the District, based ern.. prinofplas of ane oy, and therelbre it should
<br />da absolved from any coverage reapo sibility. However, kr owleedge is :not imputed
<br />there the agent ,is acting on his own behalf and advetseisy to the interests of the
<br />pri=lpal. "WhIle itt geneml ths knowledge of ars agent which he is under a duty to
<br />dWose is to to imputad to the principal, it is well estebtfshed that ghats the agent ads
<br />in his own interest or where the interest of the agent is adverse to tisprincipal, the
<br />ltnawledge of the agent will not ba imputed to the PtinCipaV Pile V. 87 Cal_
<br />App 3d $50, 566 (Cal. CL App. IM) feiWcns rniited); see also erallbrjy Eshates
<br />Gen. P'Ship V, BayviOw Firs. Trading Grip, Inc,, 267 F. Supp» 2d 1213-,1227 ( .D, Cal.
<br />2003) VQourts, 11urthermore, will ncd impute :an ages actons to his or her principal
<br />when the agents ac"tion Is adverse to tl principal.").
<br />Martfdrd dies on In re Payrroff Express Corp,, 16-6 Rad 1128 (2nd Or. 1999), for
<br />this proposition tit the Insured, rathar than the insurer, sbotild should10ar the risk in such a
<br />situation. A�yroli &,press relies on New Jersey laser for this fin€ting, and is not In
<br />accaWan with other j urlsdiotionsthat have addresses this issue. See, e.g., r' a rland
<br />Cas- Co. v. Tulsa Indurs. Loran & Inv Cm, 6:3 F= 2d 14� 16.17 (t Cath Cir. 1936); , at
<br />Found M"I Dank v. St. Paul Fir& & 1 adfle firs. Co., 32 Wash.1pp, 32, 6 P. 2d 1122,
<br />f1126-23 (fashApp.1982); Banciniure„ Inc, v. U. K- Bencorpwadan IracJUNIled
<br />entuc y ankofPetidlelon County, Inc., X30 I~, Supp. 2d 294, 301 .D. Ky. 2011),
<br />Federal OepoO ltt, Corp. v. Loft, 460 R2d 82, 88• (5th Cir.1972)„ But, more importantly,
<br />Paym# Express is ofearly distln ui-Mha tale on the fates_ There, the, fburrder, President and
<br />CSC and his vAte, who. 16intly coaned 100 of the interest in the company were
<br />engaged in a loans- standing arnbaz7jement scheme priar to Initially applying fbr the
<br />pedicles at issue. Payroll Express Corp., 166 F.3d at 2M
<br />Lika- ise, in West rnerican Finance Co, v. Parc Indemnity Co., 17 Dai. App1d
<br />225 (1936), the individuals involved in the fraudulent scheme included the president and
<br />three serer officers who jointly rn a up a majority of the board of dfrecora and tamed
<br />all the stock of the irises"red company. In eft t, they were "Bang out indernniLy bonds
<br />insuring their own Ada*," Id. at, 229. The GotjTt made this a carttral focus of its decision
<br />to deny the company the benefits of the policy,
<br />while this group of men were fts pro tiding to farten these los,-as or,
<br />the oorporation's shoulders they ware at the sage time, as tha goveming
<br />board of director. of the corporation. obiaint nq from the [insurer] fidelity
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