March 16, 2009 |

Insurance Coverage

Our client had issued an insurance policy to a contractor. The application, in response to a question about “Will you be performing work on slopes?” said “No.” But the policy was actually purchased only for one job – a series of retaining walls at the bottom of a virtually vertical cliff. Our client had never agreed to insure anyone working on a slope of over 20 degrees. Two weeks after the insured quit the job (because of safety concerns) an employee of the replacement contractor fell down the construction stairs and became a quadriplegic. Our client agreed to provide coverage, subject to an action seeking to rescind the coverage, based on the false information in the application. We also sued the broker based on the authority of a California decision allowing such claims. The case was settled at mediation. Our client not only paid nothing to settle the underlying case, but they also received sufficient reimbursement to cover all of the defense costs and a substantial portion of the costs for coverage counsel.