                             UNPUBLISHED

                  UNITED STATES COURT OF APPEALS
                      FOR THE FOURTH CIRCUIT


                             No. 03-1259



TIG INSURANCE COMPANY,


                                              Plaintiff - Appellee,

     versus


ROBERTSON, CECIL, KING & PRUITT, a limited
partnership; ROBERTSON, CECIL, KING & PRUITT,
LLP; DAVID E. CECIL; THOMAS L. PRUITT;
INTREPID COAL COMPANY, INCORPORATED,


                                           Defendants - Appellants,

           and

F. D. ROBERTSON; PATRICIA B. ROWE; JAMES C.
BRANHAM; JANET M. MCMAHON; DONALD KEITH
MCCLANAHAN,

                                                         Defendants.


Appeal from the United States District Court for the Western
District of Virginia, at Abingdon. James P. Jones, District Judge.
(CA-01-143-1)


Argued:   October 27, 2004             Decided:    November 17, 2004


Before MOTZ and TRAXLER, Circuit Judges, and HAMILTON, Senior
Circuit Judge.


Affirmed by unpublished per curiam opinion.
ARGUED: Monica Taylor Monday, GENTRY LOCKE RAKES & MOORE, Roanoke,
Virginia, for Appellants. Carol L. Johnson, BOLLINGER, RUBERRY &
GARVEY, Chicago, Illinois, for Appellee. ON BRIEF: S. D. Roberts
Moore, Mary Beth Nash, GENTRY LOCKE RAKES & MOORE, Roanoke,
Virginia; T. Shea Cook, Richlands, Virginia, for Appellants. Bryan
G. Schumann, Michael G. Patrizio, BOLLINGER, RUBERRY & GARVEY,
Chicago, Illinois, for Appellee.


Unpublished opinions are not binding precedent in this circuit.
See Local Rule 36(c).




                                2
PER CURIAM:

     In this diversity insurance coverage dispute, the district

court granted summary judgment to the insurance company.           For the

reasons set forth within, we affirm.



                                      I.

     On April 5, 1999, Ronald King, on behalf of Robertson, Cecil,

King & Pruitt (“the Firm”), signed a renewal application for

professional liability insurance through TIG Insurance Co. (“TIG”).

As part of that application, King was asked:

     Is any attorney in your firm aware of any claims made
     (whether reported or unreported), incidents (whether
     reported or unreported), wrongful acts, errors, or
     omissions that could result in a professional liability
     claim against any past or present attorney of the firm or
     its predecessors or is there a reasonable basis to
     foresee that a claim would be made against any past or
     present attorney or the firm or its predecessors?

King responded that there had been “no change,” which based on the

Firm’s past applications translated into “no.”        On April 21, 1999,

TIG reissued the insurance policy.

     On June 21, 1999, King died from a self-inflicted gunshot

wound.   Soon     thereafter,   the    Firm   discovered   that   King   had

misappropriated client funds.     Based on this conduct, a number of

persons filed   suit against the Firm, its successor, the partners

of the Firm as individuals, and King’s estate (collectively the

“Partnership”).



                                      3
     The Partnership then requested defense and indemnification

from TIG.1   In response, TIG filed the instant action, seeking (1)

rescission of the policy based on a misrepresentation in the

application, or (2) a declaration that the claims were not covered

by the policy based on that same misrepresentation, or (3) a

declaration that the “Compton claim” in particular was not covered

because King’s conduct fell within an exclusion in the policy. The

Partnership counterclaimed for breach of contract.     The parties

filed cross-motions for summary judgment, and the district court

granted summary judgment to TIG, finding the insurer entitled to

rescind the policy, which left the Partnership without coverage.



                                II.

     Under Virginia law, which applies here, an insurance company

is entitled to rescind an insurance policy if it can show “by clear

proof” that (1) a statement in the application was untrue and (2)

“the insurance company’s reliance on the false statements was

material to the company’s decision to undertake the risk and issue

the policy.” See Va. Code Ann. § 38.2-309; Comm. Underwriters Ins.



     1
        All of the claims against the Partnership at issue in this
case -- “Compton,” “McClanahan,” and “Intrepid Coal” -- are
premised on allegations that King misappropriated client funds. In
the “Compton” case, the district court has entered judgment against
the Partnership. In the “McClanahan” case, judgment was entered
against King’s estate, and the case against the other parties
settled. Finally, at the time of briefing the case at hand, the
“Intrepid Coal” case was pending in state court.

                                 4
Co. v. Hunt & Calderone, 261 Va. 38, 42 (2001).              The Partnership

argues that TIG was not entitled to rescission because: (1) TIG did

not prove the required elements for rescission, (2) the policy

provided for “cancellation” as the remedy for misrepresentations,

and (3) allowing rescission in this case, in which the Partnership

contracted for “innocent partner” protection, would eviscerate the

“clear intent of the policy.” None of these contentions has merit.

                                       A.

     The Partnership’s initial contention -- that TIG is not

entitled to rescission because it failed to prove the required

elements for rescission -- is belied by the record.

     The Partnership makes two arguments with respect to the first

required element of “untruthfulness.”            First, it argues that the

response to the application question was not “untrue” because at

the time King signed the application no clients had notified him of

their dissatisfaction.2       Client notification, however, is not

required under the plain language of the policy which requests

information   on   “any   claims   .    .   .   wrongful   acts,   errors,   or

omissions that could result in a professional liability claim.”

     Next, the Partnership argues that the statements were not

“untrue” because King could have converted the funds during the

two-month period between signing the application and King’s death.


     2
        Of course, his clients did not “notify” King of their
dissatisfaction only because he had deftly kept them in the dark
with respect to his fraudulent behavior.

                                       5
The Partnership offers no affirmative support for this statement,

and ignores the strong record evidence to the contrary.3               Indeed,

during oral argument, the district court expressly asked whether

King engaged in “wrongful activities” prior to signing the 1999

renewal application, and the Partnership agreed that it did not

dispute that he had.       Because it is evident from the record that

King had already converted client funds prior to signing the 1999

application, his assertions in that application were patently

untrue, satisfying the first rescission requirement.

     Nor do we find any more persuasive the Partnership’s argument

with respect to the other rescission requirement -- that TIG

assertedly failed to demonstrate that the misrepresentations were

material.     To prove that a fact is material to the risk, an insurer

must demonstrate that it would influence its decision to issue the

policy.     Mutual of Omaha Ins. Co. v. Echols, 207 Va. 949, 953-54

(1967).     A court will not take “judicial notice” of this fact, see

Harrell v. North Carolina Mutual Life Ins. Co., 215 Va. 829, 833

(1975)     (discussing   predecessor     statute),    nor   will   boilerplate

language     in   the    policy     asserting   the   materiality     of   all

representations suffice.          Comm. Underwriters, 261 Va. at 43.        But

an       underwriter’s     sworn      statements,      particularly        when


     3
       In particular, the record reveals that King converted funds
from Compton when he took possession of a check in 1996; that he
pilfered funds from the McClanahan estate from 1993 to 1997; and
that he assertedly misappropriated funds from Intrepid Coal Corp.
in 1998.

                                        6
uncontradicted, are sufficient to demonstrate the materiality of

the misrepresentation. Echols, 207 Va. at 954-55; Hawkeye-Security

Ins. Co. v. Gov’t Employee Ins. Co., 207 Va. 944, 948 (1967).

     In   this     case,   TIG   submitted   an    affidavit      from   a     TIG

underwriter, which specifically averred that a policy would not

have been issued if King had disclosed his misconduct.                         The

Partnership offered no evidence to the contrary, and conceded

during the motions hearing that the information might indeed “be

material.”   As the district court noted, it would be “unimaginable

that the facts of King’s misconduct would not be material to the

risk of insuring against future malpractice claims.”

     Thus, TIG proved the required elements of recission.

                                     B.

     The Partnership next contends that even if TIG technically

satisfied    the   rescission    elements,   TIG    waived       its   right    to

rescission    by    mentioning     “cancellation”     as     a     remedy      for

misrepresentations in the policy.         This argument too fails.

     Cancellation and rescission are different and alternative

remedies.    By “rescinding” the policy, the contract is voided ab

initio, alleviating TIG’s responsibility for any claims arising

during the policy and requiring it to return the premiums paid.                 If

TIG instead chose to “cancel” the contract as provided for in the

policy, TIG would still be responsible for defending against prior

claims, because relief would be prospective only.


                                      7
     The Partnership has failed to cite any authority for the novel

proposition that providing for “cancellation” in an insurance

policy necessarily precludes the alternative remedy of rescission,

and there is no reason why it should.       Although an insured could

contract   for   “greater   protection,”   including   a   limitation   of

remedies, the Partnership did not do so here.               See Atlantic

Permanent Fed. Savings & Loan Assoc. v. Amer. Casualty Co., 839

F.2d 212, 215 (4th Cir. 1988) (enforcing policy language, under

Virginia law, which stated that the policy “shall not be voided or

rescinded”); see also Sterling Ins. Co. v. Willie Roy Dansey, 195

Va. 933, 943 (1954) (enforcing language in application requiring

answers to be “knowingly” false). In this case, the policy allowed

either party to cancel, and specifically stated that the insurer

“may” cancel the policy for several reasons, only one of which was

because of a “misrepresentation in the Application.” Thus, although

under the policy TIG “may” choose cancellation over rescission, it

is by no means required to do so.

                                   C.

     Finally, the Partnership contends that allowing rescission

would violate the “clear intent of the policy” because it would

allow TIG to eviscerate the “innocent partner” protection provided

in the policy.    This argument rests on a misunderstanding of the

scope of the policy’s “innocent partner” protection.




                                   8
     Even if, as Cecil and Pruitt vigorously contend, they did not

know of King’s misrepresentation on the application, they were not

“innocent partners” for the purpose of the insurance policy.        The

only protection for “innocent parties” provided in the policy is

Exclusion 1, and is limited to protection from judgments “arising

out of any dishonest, fraudulent, criminal, malicious or knowingly

wrongful   act,   error,   omission,    or   Personal   Injury.”    The

Partnership could have, but did not, contract for additional

protection in the case of a partner making misrepresentations on

behalf of the partnership on the application form.        Cf. Atlantic,

839 F.2d at 215 (noting policy language stating that the policy

“shall not be voided or rescinded and coverage shall not be

excluded as a result of any untrue statement in the [application]

form, except as to those persons making such statement or having

knowledge of its untruth”).    Thus, although Cecil and Pruitt may,

in fact, be “innocent,” they did not contract to be protected in

this circumstance, and as a result, rescission of the policy does

not violate the “clear intent of the policy.”

                                 III.

     For all of these reasons, the judgment of the district court

is

                                                              AFFIRMED.




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