A federal court in Kentucky has held that a CGL insurer may be obligated to provide coverage beyond the scope of a policy’s terms if a policyholder relies on misrepresentations of the insurer’s agent. Essex Ins. Co. v. Ricky Robinson Construction, Inc., 2015 WL 918492 (E.D. Ky. March 3, 2015).

A contractor was sued for constructing a home on an allegedly unsuitable lot on the basis of breach of contract, negligence, fraud and unjust enrichment. The contractor’s CGL insurer filed a declaratory judgment action, asserting that the claims did not arise out of an “occurrence.” The court agreed and held that, under Kentucky law, none of the claims arose out of an accident because they arose out of events that were within the control of the insured. The insured argued, however, that it purchased the policy because the agent advised that it would cover faulty workmanship and presented an affidavit attesting to this inducement. The insurer denied that any agency relationship existed. The court ruled that the insurer could be liable for injury caused by the contractor’s reliance on the misrepresentations of the agent and denied summary judgment, concluding that it needed more evidence to make a factual determination regarding the existence of an agency relationship and the alleged misrepresentations.