Legal Question in Insurance Law in Connecticut

Insurance Errors and Omissions Policies

I am dealing with a client who is a real estate broker and had an Errors and Omissions Policy through an Insurance Agency. He had an agent working for him who was going to be in partnership with a contractor and both the broker and the agent disclosed this in their contract to potential buyers of those houses. It turned out, however that they never formed a partnership, but the language was still in those contracts. Of course the houses the contractor built turned out to be below standard and now the buyers are suing everyone including the broker and agent. The issue is now, the insurance company is saying it doesn't have to provide a defense for my broker because of the language of the insurance contract. The language states that there is no duty to defend if the matter in question arose from a purchase sale,delevopment that the insured had a financial interest in. We are trying to find some cases on point that would find in favor of teh broker even if he DID have a financial interest.


Asked on 10/13/99, 10:30 am

1 Answer from Attorneys
Steven Murray Steven W. Murray, APC

Re: Insurance Errors and Omissions Policies

Take a look at Smith-Kandal Real Estate vs. Continental

Casualty Co. (1998) 67 Cal.App.4th 406, 79 Cal.Rptr. 2d

52.

Your client would be covered since he is only vicariously

liable for any tort - which means HE was not a

partner and HE did not have any financial interest

in the transaction. There is a doctrine of

severability in insurance law, and in most policies

there is a "severability" clause.

You might also try to put your client into another

capacity, as in the "dual-capacity" doctrine.

And, what about the client's CGL coverage? Isn't there

p.d. and b.i. or personal injury being alleged?

Please call me if you would like to discuss this.

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Answered on 10/14/99, 8:56 pm


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