Contractor's insurance claim denied, except for estoppel

Demolition Contractors, Inc.  (DCI) experienced difficulty with the concrete gravel it used in rebuilding a subdivision's roads and had to spend more than $200,000.00 to re-do its work.  It made a claim against its insurer, Westchester Surplus Lines, for covered property damage.  Westchester denied payment and Demolition Contractors sued.  The parties agree there was coverage for the claim, however, Westchester argued that in making "voluntary payments" to remediate the road, Demolition Contractors had released Westchester from its contract obligation.

The Court found that DCI violated the terms of its insurance policy when it undertook to re-build the roads on its own, without Westchester's consent.  The Court found that DCI had not justified this violation by proof of environmental and litigation concerns which it claimed necessitated immediate action to mitigate its potential exposure.  On the other hand, the Court found that Westchester was estopped to refuse payment of $75,000.00 in coverage--the amount which it had initially approved in writing to DCI, since DCI had acted to its detriment in reliance upon that promised payment.