Our client’s insurance agent incorrectly completed a commercial fire insurance application. The insurance company chose to ignore the error, issue the policy, and collect premiums due under the policy, while secure in its belief that it had no risk. In the event of a claim, the insurer was confident it could successfully argue it was entitled to rescind the policy due to the misrepresentation on the application. This deceptive practice, called “post-claim underwriting,” is a common insurance industry scam that leaves many insureds bereft of valuable coverage and facing financial ruin. Our client fell victim to this deceptive insurance company tactic and faced a life-ruining, undue hardship as a result.
The Challenge
Born and raised outside the United States, our client came to this country and worked at menial jobs with the goal of saving enough money to start her own business. After years of scrimping, saving and foregoing vacations, she purchased a mixed-use commercial property on a busy metropolitan thoroughfare. There were residential units above and a cell-phone store and a restaurant below. Because our client did not speak or read English, she placed her full faith and confidence in an insurance agent to procure appropriate fire insurance for her commercial property.
Unfortunately, the insurance agent incorrectly completed the fire insurance application. Specifically, the agent incorrectly responded “No” to the question of whether there was “open flame” cooking on the premises, when, in fact, the restaurant cooked using open flames. After our client signed the application for fire insurance, the insurance company performed an in-person, thorough post-application inspection of the property and continued to accept premiums.
After a fire engulfed a substantial part of the commercial property, our client made a claim against the policy. Based on its post-fire “investigation,” the insurance company denied the claim and rescinded the policy back to the date it was issued. The insurer argued that it did not know about the open flame cooking in the restaurant, and that, had it known the true facts, it would never have issued coverage.
The Solution
The property owner contacted Schwartz, Conroy & Hack and we promptly filed a lawsuit.
During the course of the suit, our attorneys made multiple visits to the scene of the fire, conducted witness interviews, reviewed the insurance company’s entire claim file, and deposed key witnesses. Ultimately, our attorneys developed proof that the insurance company knew or should have known, through the insurer’s post-application inspection, that the restaurant used open flame cooking. During the investigation, open flames were clearly visible from the multiple gas stoves in the restaurant’s kitchen.
Throughout the proceedings, the insurance company steadfastly maintained that it had no idea about the open flame cooking, and the company filed a motion for summary judgment to dismiss the case. But armed with videotape, deposition testimony, and sworn affidavits gathered over the course of the litigation, our firm demonstrated that the insurance company knew or should have known about the open flame cooking by virtue of its pre-fire inspection. We argued, and the judge agreed, that an insurance company is “estopped,” or precluded, from seeking rescission when it has actual knowledge of a misrepresentation on an insurance application.
The Result
Schwartz, Conroy & Hack successfully defeated the insurance company’s motion for summary judgment and, correspondingly, its last attempt to avoid its obligations to pay for our client’s fire loss. Just before the case went to trial, the insurance company gave up and paid our client’s claim, allowing her to recoup a lot of her damages and get back on her feet.
Through our deep understanding of insurance law, our dogged persistence, and our refusal to back down, our firm protects our clients’ rights. If you have a business insurance claim that is under investigation, disputed or denied, or you feel your current counsel is not getting the job done, contact us. We are happy to evaluate your situation and determine if we can help you get the coverage your company paid for and deserves.