In the ongoing saga of the Philadelphia Salvation Army building collapse, a pair of summary judgment motions (Berkley 1 and Berkley 2) was filed this week urging the court to void coverage for an amateur demolition contractor.  On June 5, 2013, a building undergoing demolition collapsed onto the neighboring Salvation Army Thrift Store in Center City, Philadelphia.  The store was open at the time of the collapse.  As a result, seven people died and thirteen were injured.

Since then, nearly one dozen lawsuits have been filed in relation to the collapse.  In the matter of Berkley Assurance Co. v. Campbell, et al. docket no. 130800129, Philadelphia Court of Commpn Pleas, Berkley unsuccessfully attempted to void insurance coverage for its insured – the demolition contractor – on the basis that the policy had been cancelled prior to the disaster due to nonpayment by Campbell.  The Philadelphia Court of Common Pleas rejected this argument.

Now, Berkley is trying again to void coverage, this time arguing that Campbell obtained the policy through fraud.  More specifically, Campbell covered up a lack of major construction experience by painting a picture of a stable, long-standing, large demolition company with significant experience in contracting for and conducting demolition activities.  In reality, Campbell only had a few men working for him and had virtually no experience or expertise in commercial demolition work.  In fact, Campbell’s last job was operating a food truck.  In addition, Berkley is renewing its motion that the policy was cancelled due to Campbell’s failure to pay the first premium installment.

How the court rules on these summary judgment motions will be instructive.  Presently, for an insurer to carry burden of proving misrepresentation in Pennsylvania, it must show that the representation was false, that subject matter was material to risk, and that the applicant knew it to be false and made representation in bad faith.  See AG Allebach Inc v Hurley, 540 A.2d 289 (Pa. Super. 1988).  Should the insurer establish a material misrepresentation, the remedy is rescission of the policy.  Such a harsh penalty should deter insurance fraud; however, as many insurers know, fraudulent answers and material misrepresentations are an all too common occurrence these days.   Thanks to Hillary Ladov for her contribution to this post.  Please email Brian Gibbons with any questions.