Oscar Gruss & Son v. Lumbermens Mutual Casualty Co.

FEINBERG, Circuit Judge:

In 1961, Lumbermens Mutual Casualty Company issued a policy of insurance, known as a Brokers Blanket Bond, to Oscar Gruss & Son, a partnership dealing in securities. The policy insured Gruss against loss caused by fraudulent acts of employees. In July 1962, Gruss notified Lumbermens that a Gruss employee had apparently committed fraudulent acts which might cause substantial claims against Gruss. Claims in large amounts did subsequently descend upon Gruss and were finally settled at great expense. The reaction of Lumbermens, however, was to disclaim liability under the…