Penn. Supreme Court Affirms Fraud Ruling for Insurers

October 29, 2001

Pennsylvania’s Supreme Court has affirmed a lower court judgment reinstating a verdict in favor of the Home Insurance Co. and certain London Market Insurers, voiding the policy of the Rohm & Haas Company, covering the cleanup of two waste sites, for fraudulent misrepresentations.

Rohm & Haas brought a declaratory relief action against the insurers seeking to recover on an excess policy for some $90 million in site cleanup expenses for its Whitmoyer Laboratories subsidiary. At trial the insurers introduced evidence that the plaintiff was aware shortly after it bought Whitmore in 1964 that there was considerable arsenic pollution at the site, but had failed to disclose this fact to its excess insurers for almost 24 years. The jury found in favor of the insurers, but the trial judge overruled it, and ordered judgment for Rohm and Haas.

The Appellate Court reversed the judgment, and found in favor of the insurers. Penna.’s. Supreme Court affirmed the result, indicating that the insurers should prevail, if they can prove that fraudulent misrepresentations were material to the risk to the extent that it would influence their decision to cover it or not, and that there was a deliberate intent to deceive. It found that a failure to disclose material facts could satisfy this test, and did in this case.

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