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Insurer wins reversal in dispute with plumbing company

Posted On: Mar. 19, 2019 2:59 PM CST

Legal ruling

A federal appeals court has partially vacated a lower court ruling and held an insurer can proceed with its effort to rescind a policy it had issued to a plumbing company that is being sued by an injured firefighter.

United States Underwriters Insurance Co., a unit of Wayne, Pennsylvania-based Mt. Vernon Fire Insurance Co., issued a policy to Flushing, New York-based Orion Plumbing & Heat Corp. in May 2012, according to Monday’s ruling by the 2nd U.S. Circuit Court of Appeals in New York in United States Underwriters Insurance Co. v. Orion Plumbing & Heating Corp.

It canceled the policy in September 2012, according to the ruling. But before it did so, a New York City firefighter suffered injuries that occurred during renovation of a home in Rego Park, New York. The firefighter sued the property’s owner alleging his negligence had caused the fire and, hence, the firefighter’s injuries.

The owner then filed a complaint against Orion, which had worked on the home, according to the ruling. The owner and Orion were dismissed from the lawsuit. The firefighter appealed the dismissal of his claims against the homeowner.

US Underwriters then filed suit against Orion in U.S. District Court in Brooklyn, New York, seeking a declaration it had no duty to pay the firefighter’s claims against Orion and a rescission of the insurance policy on the ground Orion had made material misrepresentations when it applied for the policy. When Orion did not answer the complaint, the court clerk entire a default judgment against it.

US Underwriters then moved for a default judgment against Orion. The U.S. District Court upheld a magistrate judge’s opinion dismissing its claim for a declaration of no coverage and ruled against the insurer seeking recession of the policy.

This rescission ruling was overturned by a unanimous three-judge panel. “US Underwriters does indeed have a justiciable claim. We have held that rescission claims may be justiciable even absent a pending claim,” said the ruling, in partially vacating the lower court’s ruling and remanding the case for further proceedings.

Attorneys in the case either could not be reached or had no comment.