Fast Lane car service applied for insurance, and represented to Liberty Mutual that it was based in Suffolk County and operated an airport limousine service. Liberty then issued a policy, and calculated the premium according to Fast Lane’s statements.

Subsequently, Liberty learned that Fast Lane instead operated a “for-hire” transportation service in Brooklyn — a much riskier venture than Liberty thought it insured. In an unusual move, Liberty filed suit in federal court for the difference in premium that it would have charged Fast Lane had it been aware of the true nature of its business. The Court, on default, agreed that Fast Lane had made both intentional and negligent misrepresentations, and awarded Liberty the $174,193.00 difference in premium, as well as pre and post-judgment interest.

What we find unusual about Liberty’s strategy is that it did not move to rescind the policy based on the misrepresentations. As it recognized, a “for hire” car service is a riskier operation because its drivers are more likely to be involved in accidents — and we wonder if any resulting lawsuits are pending. Having been awarded the additional premium, we query whether recision remains an available option. And even if it is, Liberty would simply need to return more premium to its insured (assuming the award is ever paid).

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