Evanston Ins. Co. v. G&T Fabricators Inc. (E.D.N.C. September 23, 2010)
Allied Terminals Inc. (“Allied”) hired G&T Fabricators Inc. (“G&T”) to repair an above-ground storage tank at its facility in Chesapeake, Virginia. G&T was required to have general liability insurance coverage of at least $1 million. G&T purchased this coverage from Evanston Insurance Company. In November 2008, an accident caused the tank that was being repaired to spill 2 million gallons of liquid fertilizer. G&T filed a claim and the insurer rescinded the policies, refunding the premiums paid. The insurer filed a declaratory judgment action seeking an order directing that it had no duty to defend or indemnify the company because its executive made misrepresentations in its policy applications.
The United States District Court for the Eastern District of North Carolina granted the insurer’s motion for summary judgment that it owed no duty to defend or indemnify and that the policies were properly rescinded. The court noted that the company’s executive admitted to the court that he misrepresented the nature of his business in the application for the insurance policy. Despite providing answers to the contrary on the policy applications, the executive was exposed to chemicals during his work at the Allied facility, G&T was operating under a guarantee or hold-harmless agreement with Allied and the executive was performing alterations on the tank. According to the underwriters’ undisputed testimony, neither of the policies would have been issued had any one of these questions been answered truthfully. The court rejected Allied’s argument that the insurer was estopped from rescinding the policies because the insurer had no duty to investigate G&T’s business or the truth of the applicant’s statements.
Accordingly, the court held that the insurer owed no duty to pay or indemnity costs to G&T for claims stemming from the fertilizer spill at the Allied facility.
For a copy of the decision, click here
Toni Frain and Joseph Oliva
https://www.goldbergsegalla.com/attorneys/Frain.html
https://www.goldbergsegalla.com/attorneys/Oliva.html
case provided courtesy of Lexis.