In Berkely Assurance Company vs Campbell, Campbell was hired to demolish a building in Philadelphia. During the demolition, an unbraced wall fell onto an adjacent Salvation Army store killing and injuring employees and customers. Berkely issued a policy to Campbell, but claimed it was void because of misrepresentations in the application and because Campbell failed to pay for the policy. The judge ruled the policy was invalid from the beginning, making the arguments about payments moot.
The Application stated:
[t]his application does not bind the applicant nor the company to complete the insurance, but it is agreed that the information contained herein shall be the basis of the contract should a policy be issued.
In the application, Campbell said he documented the conditions of nearby structures before demolition begins, that he had a formal loss control or safety program and a risk manager or safety director; and that he did not use subcontractors. Apparently, these were all lies.
In this case, the deposition testimony of Campbell shows that he not only made misrepresentations in his Application for demolition insurance, but was also aware that he was lying. Specifically, Campbell knew that he had not documented the conditions of nearby buildings prior to demolition, yet answered “Yes” —that he had. He knew that he had no risk manager/safety director, nor any safety measures in place, yet he answered “Yes”. And he wrote “Yes” to two related questions asking whether he had such personnel and safety plans. He also knew that he used a subcontractor to demolish 2138 Market Street, yet answered “No” to the question asking him whether he indeed had such a subcontractor. Indeed, Campbell not only knowingly misstated this fact, but his deposition transcripts show he thoroughly understood the difference between an employee and a subcontractor.
All of the falsehoods are material misrepresentations since each one, “if given, would have influenced the judgment of … [Berkley] in issuing the policy, in estimating the degree and character of the risk, or in fixing a premium rate.”
The court also found Campbell’s misrepresentations were “palpably and manifestly material” such that the Court could enter judgment without a jury finding on bad faith or fraud.