COURT DECISIONS

Rough Notes, May 2006

Digested from case reports published in Westlaw, West Publishing Co., St. Paul, MN

Insurer denies existence of 1960s policy

ACMAT Corporation was in the business of installing acoustical ceilings in commercial buildings. Since 1988, ACMAT had been named in several lawsuits seeking compensation for damages caused by exposure to asbestos. The alleged injuries dated back to the 1950s. At that time, ACMAT was called Acoustical Materials Corporation, and was a subsidiary of a New York corporation called Waldvogel Brothers, Inc.

ACMAT searched its records hoping to locate insurance coverage applicable to the injuries alleged in the lawsuits. It did not find insurance policies; however, it did find evidence that Greater New York Mutual Insurance Company had insured Acoustical Materials Corporation. A certificate of insurance issued by an authorized representative of Greater New York indicated that Acoustical Materials Corporation had in effect through January 1, 1966, a products liability and comprehensive general liability policy with bodily injury limits of $500,000 per person and $1 million per accident. ACMAT brought the certificate to the attention of Greater New York. Greater New York denied the policy ever existed.

ACMAT filed an action seeking a declaration that Greater New York had issued the policy and that the policy was in full force and effect from January 1, 1964, to January 1, 1968. The trial court found that Greater New York did in fact issue a comprehensive general liability and products liability policy with limits of $500,000 per person and $1 million per accident. The court also found that coverage was in effect from January 1, 1965, to January 1, 1966, and that the policy and its "similar predecessors and successors" were in effect from January 1, 1964, to January 1, 1968. Greater New York appealed.

On appeal, Greater New York tried to establish that the trial court should not have decided the case because, for technical, procedural reasons, it did not have the authority to decide such a case. The Appellate Court of Connecticut disagreed with these procedural arguments. It then proceeded to hear Greater New York's substantive arguments, specifically that the evidence did not properly prove the existence of an insurance contract and that the certificate of insurance was "suspect."

During the trial, ACMAT presented evidence including (1) the certificate of insurance itself; (2) letters from Greater New York acknowledging receipt of workers compensation claims submitted by Acoustical Materials Corporation for employees injured during the years 1964, 1965, 1966 and 1967; (3) documents from 1967 and 1968 detailing Acoustical Material Corporation's transfer of its insurance coverage from Greater New York to Aetna Life and Casualty Company; (4) a deposition from Acoustical Materials Corporation's previous owner stating that he had obtained insurance coverage for his company from Greater New York; (5) the testimony of an agent who sold Greater New York insurance coverage to Acoustical Materials Corporation in 1962; and (6) the testimony of a Greater New York employee who issued the policy to Acoustical Materials.

The appellate court concluded that there was sufficient evidence to support the trial court's findings regarding the insurance policy, and that the trial court's decision was reasonable.

The judgment of the lower court was affirmed.

ACMAT Corporation vs. Greater New York Mutual Insurance Company-No. 25099-Appellate Court of Connecticut-April 12, 2005-869 Atlantic Reporter 2d 1254.

Split decision on false statements in application

Okie Dokie, Inc., was the owner of a nightclub called "Dream" located in the District of Columbia. C. J. Thomas, Inc., Okie Dokie's insurance broker, procured from Burlington Insurance Company a commercial general liability insurance policy covering Dream. In the application, Dream was described as a "RestaurantIBar with a Dance Floor." The application also stated that Dream's prior insurance carrier had canceled its policy because Dream had a dance floor. In addition, it stated that Dream did not sponsor "Social Events," and that its sales were made up of $3 million in food sales and $1 million in liquor sales.

Shortly after Burlington issued the policy, a police officer named Hakim Farthing was killed by an underage drunk driver who was suspected of drinking at Dream. Farthing's estate sued Okie Dokie for $50 million. Burlington paid some costs associated with the Farthing lawsuit, including a $410,000 settlement; however, it claimed it had no duty to defend or indemnify Okie Dokie in the action. It filed its own action against Okie Dokie and C.J. Thomas, seeking a declaration that it had no duty to defend or indemnify. It also requested rescission of the policy as well as reimbursement of all costs it had already paid. The United States District Court, District of Columbia, decided the case. Because Okie Dokie's corporate offices were in the District of Columbia, and because the Farthing case was brought in D.C., the law of the District of Columbia applied.