Is the policy voidable given the omission on the policy

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Reference no: EM131845974

Last year, the company was sued over a big batch of widgets that had a serious defect. The litigation is ongoing, and could result in a multi-million dollar loss. Your company has a commercial general liability policy with a $1 million limit. Given the recent lawsuit, your company realizes that its current coverage is not adequate, and is looking to invest in additional insurance policies going forward.

Your risk manager explained the situations to the company's insurance broker and asked him to find an umbrella policy that would provide additional limits if its primary general liability policy was exceeded by another loss in the future. The broker located a policy that would provide the type of protection the company was looking for at a very reasonable premium.

The broker filled out the company's application, which included a question asking about all litigation against the company in the last 5 years. The broker got busy with another file and forgot to list the litigation to include on the application form.

The broker sent the application (missing the litigation) to the company, and the risk manager, knowing how diligent its broker normally was, signed the form without reading it. The next year, the company was sued over a defect in its whatchamacallit line. The company gave prompt notice to the insurance company, which denied coverage for the whatchamacallits, stating that it was voiding the policy due to the omission of the widget litigation from the insurance policy application.

It is your duty to decide whether it should sue its insurance company. Answer the following questions to decide what course of action to take:

Is the policy voidable given the omission on the policy application?

Would your answer be different if the company risk manager intentionally omitted the information?

Even if the policy is voidable, should the omission of a prior widget litigation impact coverage for future whatchamacallit litigation?

Would your answer be different if the policy application did not ask for the information?

Can you think of anything the company should argue to try to convince the insurer to provide coverage before actually filing suit (or giving up)?

Reference no: EM131845974

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