Capital Mortgage Corp. v. Coopers & Lybrand

This case arises from Capital Mortgage Corporation’s (CMC) retaining Coopers & Lybrand (C&L), an accounting firm, to conduct a routine audit. During the course of the audit C&L failed to detect $1.5 million of embezzlement perpetrated by the third-party defendants, Nott, Kline and DeWitt. A major portion of the embezzlement loss, $850,000, was paid by Security Insurance Company of Hartford (SIC), which insured CMC against employee dishonesty. CMC asserts that the failure of C&L to promptly detect and disclose the embezzlement caused additional losses to occur. SIC was joined as a party…