By: AgencyEquity.com
The insurer under an excess liability policy denied coverage to a contractor for a fire loss. The contractor’s independent insurance agent was one of several parties the insured sued.
The insured was a plumbing contractor that did at least some projects in residential buildings. One of those projects was in a cooperative apartment building in Manhattan. Not long after the insured finished its work, a fire started inside a wall in one of the apartments. The court’s opinion did not state the amount of the claimed damages. However, it did mention that the primary commercial general liability (CGL) policy carried a limit of $2,000,000 each occurrence, and the dispute involved the excess policy. The loss must have been greater than $2,000,000.
The agent had obtained the CGL policy from one of the carriers it represented. They obtained the excess policy through a wholesale broker. The primary policy included a residential work exclusion at the time the carrier issued it. This exclusion said the insurance did not apply to losses arising out of work done in certain residential buildings.
The excess coverage was written on a “follow form” basis, meaning that it included the coverage grants and exclusions in the primary policy. It also contained another key provision – the excess carrier had the right to “refuse to follow any . . . change [made after the inception date of the policy] to the Scheduled Underlying Insurance, in which event this policy shall apply as if the changes had not been made.”
After the March 2021 fire, the insured submitted liability coverage claims to both carriers. The primary carrier denied coverage in April, citing the residential work exclusion. However, two months later it removed the exclusion, rescinded its coverage denial, and agreed to pay up to the $2,000,000 limit for the loss.
Sometime between June and October, the excess carrier requested a “coverage opinion” from the primary carrier. The court opinion did not elaborate on the nature of that document. Regardless, in November the excess carrier declared that the deletion of the residential work exclusion was a change that they were not obligated to follow. Accordingly, they denied excess coverage for the loss.
The excess insurer filed a “declaratory judgment action,” asking the court to affirm that they had no duty to provide coverage. The insured contested the action and filed its own claims against the primary insurer and the agent. They accused the agent of negligence in obtaining the policy. The agent asked for a judgment in its favor based on the law.
In July 2025, the court refused to rule in favor of either the insured or the agent. Because there were disputes over the facts, the judge wrote, a jury would have to sort out the truth. Specifically, he found open questions as to whether the agent adequately informed the primary insurer about the insured’s residential work; whether that insurer hid or disguised its exclusion; and whether the agent did a professional job reviewing the various proposals.
There is no further public record of this case. The sides may be preparing for trial or negotiating a settlement.
This dispute hinges on what the agent knew and what they told the insured. Unfortunately, the judge’s opinion did not mention any documentation that the agent had. If the insured had copies of emails clearly showing that the agency told them about the coverage gap created by the exclusion, their ability to prevail in the dispute would have been significantly hampered.
Having credible written evidence can win an errors and omissions dispute for an agent. Likewise, not having it can sink an agent’s chances of an easy victory. This court did not have that evidence and instead passed it off for a jury. This case shows how important written documentation can be for an agency. Because this agency did not have it, the case went on.
