A Connecticut Superior Court recently awarded summary judgment against an insurer on the basis that the a home seller’s misrepresentation regarding the existence of lead paint in the home constituted an “occurrence” under her insurance policy and, therefore, the insurer had a duty to defend the seller in a lawsuit alleging negligent misrepresentation and was liable for paying the stipulated judgment agreed to by the parties.  Fuentes, et al. v. New London County Mutual Ins. Co., et al., CV 06-5002176 (Conn. Super. July 16, 2009).  A copy of the opinion is available here.

The plaintiff, a minor child, through his mother, sued the former owner of their house (the “seller”), after the seller incorrectly represented that the house did not contain lead paint and the minor plaintiff suffered injury as a result.  The seller, an insured under an occurrence-based liability policy issued by the defendant insurer, requested that the insurer defend and indemnify her in the lawsuit, but the insurer denied coverage.  Eventually, the seller settled with the plaintiffs and, as part of the settlement, plaintiffs agreed to seek enforcement of the stipulated judgment against the insurer.

The plaintiff moved for summary judgment against the insurer on the grounds that there were no issues of material fact in dispute as there has already been a stipulated judgment agreed to by the plaintiffs and the seller.  The plaintiff also argued that the insurer had a duty to defend the seller and by not doing so it waived its right to not pay the stipulated judgment.  The insurer argued that the seller’s representation regarding the lead paint was not an “occurrence,” which the policy defined as meaning an “accident,” but rather was a misrepresentation and that Connecticut law does not recognize misrepresentations as an “occurrence” in the sale of real estate.  The insurer based its argument on the fact that the seller had the option of stating that it was “unknown” whether there was lead paint in the house and instead chose to state there was no lead paint, and it was not an accident but rather a misrepresentation.

The court ruled in favor of the plaintiffs.  The court opined that, “[a]part from intentional conduct, courts have routinely found almost any wrongful conduct to constitute an accident” (internal citations omitted) and, in the case of negligent misrepresentations, courts have only found that misrepresentations did not constitute an occurrence when the misrepresentations were made for the purpose of inducing reliance by the plaintiffs.  Because the court concluded that the seller’s actions were negligent and not intentional, there was a covered “occurrence” under the policy.  The court ruled that the insurer did have a duty to defend the seller with regard to the negligent misrepresentation claim and granted the plaintiffs’ motion for summary judgment for payment of the stipulated judgment.