Fields Howell Obtains Summary Judgment in Negligent Inspection Case

Fields Howell represented a national underwriting inspection company, in a recent victory in the United States District Court for the Western District of Missouri. The Insurer filed suit against the inspection company after the insurer failed to avoid coverage for a fire loss claim through a declaratory judgment action against its insured, the owner of a hotel. In the declaratory judgment action, the insurer argued that it had no duty to pay the claim because its insured failed to maintain a “central station fire alarm.” The trial court rejected the insurers arguments and granted summary judgment to the insured regarding coverage. The insurer subsequently settled for amounts significantly in excess of the policy's limits.

The inspection company performed an inspection of the hotel at the request of the insurer's wholesale broker, months before the fire. In its lawsuit against the inspection company, the insurer sought to recoup its settlement with the insured by alleging that the inspection company’s failure to report the absence of a “central station fire alarm” prevented the insurer from cancelling the insured's policy before the fire. The insurer also alleged that the inspection company failed to report numerous other conditions that would have caused it to cancel the insured's policy.

The inspection company filed a counterclaim for indemnity based on an indemnity provision in its inspection report and moved for summary judgment. The insurer filed a cross-motion for summary judgment, arguing that the alleged omissions or errors in the inspection company's report were material to its underwriting and prevented policy cancellation. The insurer also argued that the indemnity provision was unenforceable because it was ambiguous and not part of the contract between the insurer's wholesale broker and the inspection company. The trial court granted the inspection company's Motion for Summary Judgment, finding that many of the alleged conditions did not exist, that other conditions were not material, and that the inspection company’s indemnification provision was an enforceable contractual term that the insurer breached by filing suit against the inspection company.

The trial court’s ruling on the inspection company’s motion for an award of the attorney’s fees and litigation expenses incurred as a result of the insurer’s breach of the indemnity provision is currently pending. Paul Fields and Ryan Fellman lead the representation of the inspection company with the assistance of paralegal Tricia Arnold.