Federal court lawsuit for insurnce bad faith. Plaintiff was an attorney who obtained an errors and omissions policy with the defendant and later sought a defense and indemnity against a claim by the Lutheran Synod Foundation for the alleged conversion of $1.9 million from an estate which the insured was hired to administer. Coverage counsel hired by the defendant discovered that the insured had failed to disclose a State Bar disciplinary proceeding in his insurance application. Consequently, the request for a defense and indemnity was denied. Plaintiff then sued, seeking recovery of the $1.5 million judgment against him plus interest (a total of $2.3 million). Defendant filed a cross-complaint seeking rescission of the insurance policy.