The case, decided by the United States District Court for the Southern District of New York on February 26, 2026, offers a pointed reminder for commercial lines professionals about what can happen when material facts are omitted or misrepresented at the application stage – and how those omissions can unravel coverage entirely when a claim arises.
The setup was straightforward, if troubling. Shree Aum, LLC, the company behind the Knights Inn hotel in Tulsa, had signed a contract with a security firm, Response Protection LLC, just one month before applying for commercial insurance through Mt. Hawley Insurance Company in December 2019. That contract required all security personnel at the hotel to be armed. When Shree Aum completed the insurance application, which its sole member, Rajesh Patel, reviewed and signed, it included a Hotel/Motel Supplemental Application asking directly whether there were security guards on the property. Shree Aum answered no. A series of follow-up questions – asking whether guards were employees or subcontractors, provided by a private security company, and whether they were armed or unarmed – were left completely blank.
Mt. Hawley issued a commercial policy covering the property from December 23, 2019 to December 23, 2020, including commercial general liability coverage up to one million dollars per occurrence. The policy contained no assault and battery exclusion and no firearms exclusion.
On June 6, 2020, during the policy period, an armed Response Protection guard shot and killed a guest on the hotel premises. The victim's estate sued Shree Aum, Patel, Response Protection, and the guard in Oklahoma state court, asserting claims including negligence, negligent hiring, training, retention and supervision, premises liability, and negligent use of force, along with a claim for punitive damages.
It was at that point that Mt. Hawley went back and looked more carefully at the application. What it found prompted the insurer to rescind the policy altogether, citing New York Insurance Law Section 3105 – a provision that allows an insurer to void a policy if it was issued based on material misrepresentations in the application. Mt. Hawley's position was that the policy, as issued, should never have existed, and that there was therefore no coverage for any claim arising during the policy period, including the shooting. Mt. Hawley did agree, however, to continue defending Shree Aum and Patel in the Oklahoma litigation while the coverage dispute played out.
The insurer's underwriting guidelines turned out to be central to the case. Those guidelines required that assault and battery coverage be excluded for any risk that provides its own security, whether through employees or contractors. They further required that when assault and battery is excluded, firearms coverage must be excluded as well, through a specific policy endorsement. Mt. Hawley's underwriter confirmed under oath that these exclusions were mandatory and would have applied had Shree Aum disclosed its armed security arrangement. The policy Shree Aum actually received contained neither exclusion.
Shree Aum's own legal submissions made the insurer's case easier. In responding to Mt. Hawley's motion, Shree Aum conceded that, under Mt. Hawley's underwriting guidelines, had it disclosed its use of subcontracted armed security guards, any policy issued to it – if issued at all – would have included assault and battery and firearms exclusions. That concession, the court found, effectively confirmed that the misrepresentation was material.
Shree Aum's main argument for avoiding the rescission was procedural rather than substantive. It argued that the case should be dismissed entirely because the shooting victim's estate – as a potential claimant against Shree Aum – was a necessary party that Mt. Hawley had failed to include in the lawsuit. The court rejected that argument, finding that the estate had no direct legal rights against an insurer until a judgment is actually entered against the insured in the underlying case. Because no such judgment existed yet, the estate's interest was too speculative to require its inclusion in the coverage dispute.
With its procedural argument rejected and its own filings having conceded the key underwriting facts, Shree Aum had little left to stand on. The court granted Mt. Hawley summary judgment and upheld the rescission.
One thread of the story remains unresolved. Shree Aum filed a separate claim against Lancaster McAden Willis Smith Company, The Insurance Center – the agent that helped procure the policy – alleging that Lancaster was negligent in obtaining coverage for the hotel. That case is still pending, with the court now weighing whether to transfer it from New York to Oklahoma, where Shree Aum is based and where the underlying events occurred. Lancaster has been directed to submit its position on the transfer by March 5, 2026.
For insurance professionals, the case underscores how much turns on the accuracy of what goes into an application – and how underwriting guidelines, when clearly documented and consistently applied, can hold up in court even years after a policy is issued.
By Carleen Bongat
