Broker can't intentionally misrepresent facts on an insurance application
In 1998, a California general contractor was sued for its work on a single-family residence. The contractor's insurer initially undertook the defense of the claim under a reservation of rights. After the insurer determined that certain information in the contractor's insurance application was false, the insurer withdrew its defense. The contractor sued the insurer, alleging breach of written contract and of the implied covenant of good faith and fair dealing. The contractor also sued his broker for negligence and breach of fiduciary duty.

In its answer to the contractor's complaint, the insurer filed a cross-complaint for declaratory relief, reimbursement of defense costs and rescission of its policy. The broker, meanwhile, filed a motion for summary judgment concerning the contractor's suit against it. That motion, which was unopposed, was granted in 2002 and judgment was entered.

The insurer also filed a cross-complaint against the contractor's insurance broker, alleging that it submitted an application stating that the insured worked only as a drywall contractor. In its complaint, the insurer charged the broker with fraud, negligence and negligent misrepresentation.