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FIRST FIN. INS. CO. v. ALLSTATE INTERIOR DEMOLITIO

April 1, 1998

FIRST FINANCIAL INSURANCE CO., Plaintiff, against ALLSTATE INTERIOR DEMOLITION CORP., THE PLAZA HOTEL, PLAZA OPERATING PARTNERS LTD., FAIRMONT HOTEL MANGMNT., L.P., NEW PLAZA ASSOC., L.L.C., and HRH CONSTRUCTION INTERIORS INC., Defendants.

Robert L. Carter, U.S.D.J.


The opinion of the court was delivered by: CARTER

OPINION

ROBERT L. CARTER, District Judge

 This action for a declaratory judgment is brought by an insurer for rescission of a commercial insurance contract. The insurer seeks to rescind the contract on grounds that the insured made material misrepresentations in its application for insurance.

 In response to the insurer's claims, the insured and a codefendant filed counterclaims. In addition, crossclaims were filed against the insured by a codefendant.

 For reasons stated below, the insurer's motion for declaratory judgment is granted, as the counterclaims of the insured and the codefendant are unavailing. The crossclaims are dismissed without prejudice.

 I. BACKGROUND

 For consideration of an annual premium of $ 10,122, plaintiff First Financial Ins. Co. ("First Financial") issued Commercial General Liability Insurance Policy No. F 0227 G 410187 (the "Policy") to defendant Allstate Interior Demolition Corp. ("Allstate"). (Complt. at 5). The policy had an effective period of one year, beginning March 14, 1996. Id.

 Thereafter, Allstate commenced work under subcontract to codefendant HRH Construction Interiors, Inc. ("HRH") for the removal of two or more elevators at the Plaza Hotel (the "Plaza"). Id. at 5. On June 28, 1996 an accident occurred involving one of elevators being worked on by Allstate at the Plaza. Id. at 6.

 As a result of the accident, defendants HRH and the Plaza made claims against Allstate for repair costs, lost revenues, and other damages in the amount of $ 402,981 plus interest. (Cntrclm. at 10). In turn, Allstate filed an insurance claim with plaintiff to cover the costs associated with the accident.

 By letter of October 16, 1996, First Financial disclaimed coverage for the claims resulting from the accident. Plaintiff notified Allstate, the Plaza, and HRH that it was rescinding the policy and returned to Allstate its check for payment of the applicable premium. (Cmplt. at 6).

 First Financial's rescission of the policy and disclaimer of coverage for the accident is based on Allstate's alleged misrepresentation of the nature of its work in its insurance application. Id. at 7. Allstate described its work as "Interior Demolition and Debris Removal Contractor" in its application for the policy without making reference to its engagement in elevator removal work. Id. at 4. Yet, the accident arose from Allstate's engagement in just such work--that is, removal, or other work, involving elevators. Id. at 5-6.

 First Financial contends that it would not have issued the policy in question had it known that Allstate was engaged in elevator removal work because it does not issue insurance policies for elevator related work. Id. at 7, 9-10. Consequently, First Financial contends that Allstate's failure to disclose its involvement in elevator work constitutes material misrepresentation, which is grounds for rescission under the terms of the policy at issue. Id. at 12.

 Plaintiff's claim for rescission of the policy is also based on Allstate's alleged misrepresentation of its payroll in its application for insurance. In the application, Allstate represented its payroll for "Carpentry--Interior" at $ 60,000 and for "Garbage & Refuse Collection" at $ 30,000. Id. at 5. Plaintiff alleges that these estimations were significantly understated. Id. at 8. This alleged misrepresentation was material, plaintiff argues, because Allstate's annual premiums on the policy would have been significantly higher, or the policy would not have been issued at all, had the payroll been stated accurately. Id.

 Allstate admits that it "is engaged in interior demolition, which from time to time requires the removal and demolition of elevators." (Ans. at P 32). It also admits that its application "made no ...


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