Karen Kane Inc. v. Reliance Insurance Company, a Corporation, Opinion

O’SCANNLAIN, Circuit Judge:

We must decide, under California law, whether an insurer for incidents of employee dishonesty properly refused to pay the coverage limit for the first two of three separate one-year policy periods, in connection with an employee’s fraudulent scheme that spanned all three periods.

I

Karen Kane, Inc. (“Kane”), a California corporation, is a Los Angeles-based apparel manufacturer. Rebanee Insurance Company (“Reliance”) is a Pennsylvania corporation authorized to sell insurance in the State of California. Reliance issued Kane a package of commercial insurance policies…