Unionamerica Ins. Co. Ltd. v. Fort Miller Group, Inc., 051710 FED9, 09-15766

Docket Nº:09-15766
Party Name:UNIONAMERICA INSURANCE COMPANY LIMITED, successor-in-interest to St. Paul Reinsurance Company Limited, London, Plaintiff-counter-defendant -Appellee, v. THE FORT MILLER GROUP, INC.; et al., Defendants-counter-claimants - Appellants.
Judge Panel:Before: RYMER and McKEOWN, Circuit Judges, and FAWSETT, Senior District Judge.
Case Date:May 17, 2010
Court:United States Courts of Appeals, Court of Appeals for the Ninth Circuit
 
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UNIONAMERICA INSURANCE COMPANY LIMITED, successor-in-interest to St. Paul Reinsurance Company Limited, London, Plaintiff-counter-defendant -Appellee,

v.

THE FORT MILLER GROUP, INC.; et al., Defendants-counter-claimants - Appellants.

No. 09-15766

United States Court of Appeals, Ninth Circuit

May 17, 2010

NOT FOR PUBLICATION

Submitted May 13, 2010 [**] San Francisco, California.

Appeal from the United States District Court for the Northern District of California Bernard Zimmerman, Magistrate Judge, Presiding D.C. No. 3:05-cv-01912-BZ.

Before: RYMER and McKEOWN, Circuit Judges, and FAWSETT, Senior District Judge. [***]

MEMORANDUM [*]

The Fort Miller Group, Inc., ("Fort Miller") appeals the district court's decision allowing Unionamerica Insurance Company ("Unionamerica") to rescind its coverage of Fort Miller subsidiary Beeche Systems Corp. ("Beeche"). Fort Miller also appeals an order of reimbursement to Unionamerica in the amount of $1, 548, 292.32, for costs incurred covering Beeche, plus interest.

Under California law, intentional or unintentional misrepresentation or concealment of material information entitles the injured party to rescind a contract for insurance. Cal. Ins. Code §§ 330-32, 359. "The fact that the insurer has demanded answers to specific questions in an application for insurance is in itself usually sufficient to establish materiality as a matter of law." Thompson v. Occidental Life Ins. Co., 513 P.2d 353, 360 (Cal. 1973). Unionamerica's agent, U.S. Risk Underwriters, Inc. ("U.S. Risk"), requested information about the products for which Fort Miller sought coverage, including "any product brochures that [it] make[s] available to customers." The district court did not err in concluding that Fort Miller "failed to adequately disclose the true nature of Beeche's products when it failed to describe Beeche's products in its preliminary application and failed to provide any brochures about Beeche." Fort Miller's subsequent handwritten addition, without other notice, was not sufficient to satisfy the disclosure obligations because the policy was bound based on information in the preliminary application.

Fort Miller argues that U.S. Risk had a duty to inquire into the products it insured...

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