Travelers Casualty Insurance Company of America v. BJB Construction Corp.

Background

Travelers sued BJB Construction Corp., also identified as Moy Construction, and the Town of Mount Kisco, New York. Travelers sought a declaration concerning coverage, rescission of the insurance policies it issued to BJB, and reimbursement of defense costs.

BJB applied for Travelers insurance for a policy period beginning October 1, 2018. The application asked whether BJB performed operations on Travelers’ list of ineligible contractor operations. The list included elevator or escalator installation, servicing, or repair; drywall and plastering; debris removal; general contracting; and certain subcontracted work. The application also classified BJB as a contractor for driveways, sidewalks, or parking areas. A separate contractors application stated that BJB performed all of its work as a general contractor.

The court stated that, despite the application’s representations, BJB had performed debris removal, drywall and plastering, service and repair operations, and general contracting for elevator installations. BJB also performed some listed operations during the policy periods. Travelers later learned that BJB had contracted with the Town to install an elevator shaft and that a BJB employee was injured during the project. Travelers sent BJB a notice rescinding the policies under New York Insurance Law § 3105.

Court’s Analysis

Under New York law, an insurer may rescind an insurance policy if the policy was issued in reliance on a material misrepresentation. The insurer must prove both that a misrepresentation occurred and that it was material. A misrepresentation is material if the insurer would not have issued the policy had it known the true facts.

The court found that BJB made false statements in its application. It concluded that the question about whether BJB performed operations on the ineligible-operations list was unambiguous. The court rejected the argument that the list was confusing merely because it contained broad categories, and it found no reasonable basis for interpreting the application as asking only about operations BJB was performing at that exact moment. The court also stated that BJB had admitted performing operations on the list.

The court then addressed materiality. To establish materiality as a matter of law, Travelers had to submit evidence of its underwriting practices, such as underwriting manuals, rules, or guidelines, showing that it would not have issued the policies with accurate information. Travelers submitted a declaration from an underwriter, the ineligible-operations list, and BJB’s application. The court held that the underwriter’s assertion that Travelers would not have issued the policies was conclusory and unsupported by the required documentary evidence. The application and list did not explain Travelers’ underwriting decision-making process sufficiently to establish materiality as a matter of law.

Disposition

The court denied Travelers’ motion for summary judgment. The court did not enter judgment rescinding the policies or awarding defense costs. It directed the parties to appear for a telephonic pretrial conference on October 3, 2024, and directed the clerk to terminate the motion at ECF No. 45.

Judge

The opinion was issued and signed by Nelson S. Román, United States District Judge.