Commercial Underwriters Insurance Company v. Hunt & Calderone, P.C., et al., 261 Va. 38

Summary

The Supreme Court of Virginia reviewed a declaratory judgment concerning coverage under a professional liability claims-made insurance policy. The court held that the insurer failed to prove that the insured's application misrepresentation was material and failed to establish that the insured reasonably anticipated a claim before the policy's inception. The court affirmed the trial court's judgment requiring coverage and a defense.

Holdings

1. An insurer relying on an insured's alleged misrepresentation must clearly prove both that the application statement was untrue and that truthful information would reasonably have influenced the insurer's decision to undertake the risk and issue the policy. Commercial Underwriters failed to provide clear proof of materiality, so the policy was not voided.
2. The insurer failed to prove that the insured had a reasonable basis before policy inception to anticipate that Calderone's error would result in a covered claim. The condition precedent and policy exclusion therefore did not defeat coverage.

Questions Presented

1. Whether Hunt & Calderone's failure to update its insurance application with knowledge of Calderone's error constituted a material misrepresentation that voided the policy.
2. Whether Hunt & Calderone had knowledge of, or a reasonable basis to anticipate, a covered claim before the policy's inception, thereby defeating coverage under the policy's condition precedent and exclusion.

Disposition

affirmed