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Commercial General
Liability |
Misrepresentation |
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Policy Void Ab Initio |
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Kiss Construction NY, Inc. (Kiss)
filed a claim with its liability insurer, Rutgers Casualty Insurance Company
(Rutgers), in 2004 for injuries that allegedly occurred during the construction
of a three-family building. At the time of the occurrence, Kiss was the general
contractor for work that involved excavating and paving. Rutgers denied
coverage, claiming that Kiss misrepresented the nature of its business in its
application for insurance. Kiss filed a lawsuit seeking a declaration that
Rutgers was obligated to defend and indemnify it. The lower court found in
favor of Kiss. It specifically found that Rutgers was obligated to pay Kiss’s
defense costs until the question of whether Rutgers could rescind the policy
was decided. Rutgers appealed the lower court's decision.
When it submitted its
application for insurance, Kiss listed the nature of its business as
‘PAINTING-100%100% INTERIOR.” Kiss’s business was described as a painting
contractor on the declarations. On the Extension of Declarations, another
description read “PAINTING INTERIOR BUILDINGS-NO TANKS.” When it accepted the
policy, Kiss affirmed that the statements in the declarations were accurate,
complete and based on representations it had made in its application.
On appeal, the Supreme
Court, Appellate Division, First Department, New York, acknowledged that
Rutgers did not establish that the policy itself limited coverage to painting
or that the change in the nature of Kiss’s business altered the coverage
provided. However, it concluded that the lower court should have declared the
policy void. Two of Rutgers’ vice presidents testified in affidavits that the
company did not write policies for construction work or general contractor
work. In addition, underwriting guidelines and copies of emails declining
coverage supported the fact that the company did not write policies for this
type of work. According to the court, this was enough evidence to support
Rutgers’ argument that the policy could be declared void because the nature of
Kiss’s business at the time of the accident was materially different from the
business described in the application. The court concluded that the policy was
void ab initio (from the start) and
that Rutgers was obligated to refund premiums that Kiss had paid.
The lower court's decision was
reversed.
Kiss Construction NY, Inc.,
vs. Rutgers Casualty Insurance Company-Supreme Court, Appellate Division, First
Department, New York-April 2, 2009-61 Appellate Decisions 3d 412