A recent decision by the Appellate Division, Second Department, highlights the importance of being careful when you purchase insurance for your business. In Kay Bee Builders, Inc. v. Merchant's Mutual Insurance Co. et al, Kay Bee was hired to build a single family dwelling. A subcontractor, Maggio, installed the roof and when problems with the roof developed, Maggio refused repairs and Kay Bee had to go in and make repairs to the tune of $140,000. Kay Bee submitted the claim to Merchant's Mutual (its unclear what type of coverage was requested and what was actually provided) and the court found that the insurance company and the insurance broker provided exactly what Kay Bee asked for and, therefore, there was no liability to Kay Bee. The bottom line here is a reminder that if you get what you ask for, you are left holding the bag if its not the right coverage. It is always a good idea to sit down with your attorney AND your broker when buying insurance. There are some dangerous policies out there so you should make sure that you know what you are getting and you know what your exclusions say!!
Vincent T. Pallaci is a partner with the New York law firm of Kushnick Pallaci, PLLC where his practice concentrates on construction law.