S.B.C. Flood Waste Solutions, Inc. (SBC) applied for insurance in February 2018, but failed to disclose a family dispute by which the shareholders’ patriarch had pushed his son and two grandsons out of the Flood Brothers Waste Disposal Company (Flood), causing them to incorporate SBC, and objected to their use of the Flood name. Grinnell Mutual Reinsurance Co. (Grinnell) issued a Commercial General Liability and Commercial Auto policy to SBC Flood effective Feb. 12, 2018.
Three months later, Flood sued SBC and its shareholders alleging improper use of the Flood name in connection with the waste collection and hauling business. SBC tendered its defense to Grinnell; Grinnell filed a declaratory judgment action seeking to rescind the policies and deny coverage. The Seventh Circuit Court of Appeals agreed with Grinnell and affirmed the grant of summary judgment because (1) the potential dispute between SBC and Food was on SBC’s mind when it applied for the policy and it failed to disclose this to Grinnell, and (2) based on the underwriter’s testimony, the omission was material to Grinnell’s decision to issue the policy. Grinnell Mutual Reinsurance Co. v. S.B.C. Flood Waste Solutions, Inc., 113 F.4th 768 (7th Cir. 2024).
For a copy of the case or advice on insurance coverage, get in touch with Thomas E. Patterson at tpatterson@pattersonlawfirm.com.