Lying About Who Else Was in the Car Doesn't Void No-Fault Coverage in the Opinion of the Appellate Term, Second Department

NO-FAULT – FRAUD – ASSIGNOR'S MISREPRESENTATION ABOUT DAUGHTER'S PRESENCE IN VEHICLE – SUMMARY JUDGMENT
Excel Radiology Servs., P.C. a/a/o Candida Vinas Perez v. Clarendon Natl. Ins. Co.
(App. Term, 2nd Dept., decided 12/1/2009)

This is an another example of how the no-fault train has derailed off the fraud track.

In Nationwide Mut. Ins. Co. v. Graham, 275 AD2d 1012 (4th Dept. 2000), the Appellate Division, Fourth Department, held that the insured's "failure to make fair and truthful disclosures in reporting the incident constitute[d] a breach of the cooperation clause of the insurance policy as a matter of law", disqualifying him from liability coverage under the policy.  The Fourth Department reiterated that principle in Nationwide Mut. Ins. Co. v Posa, 56 AD3d 1143 (4th Dept. 2008), holding that the insured's Posa's "failure to make fair and truthful disclosures in reporting the [accident] constitute[d] a breach of the cooperation clause [and the fraud and misrepresentation clause] of the insurance policy as a matter of law[.]"  More recently, in AA Acupuncture Service, P.C., a/a/o Dupont-Desir Ivrose v. Safeco Ins. Co. of Amer., 25 Misc3d 30 (App. Term, 1st Dept., 2009), the Appellate Term, First Department, noted that "an insurer may assert misrepresentation or fraud as an affirmative defense in an action by an insured to recover benefits under the policy".

But not in no-fault?  Lying about how an accident occurred or whether another no-fault claimant was actually in the vehicle at the time of the reported accident is not coverage-disqualifying conduct in breach of an auto policy's cooperation and fraud/misrepresentation conditions?  Apparently not in the opinion of the Appellate Term, Second Department, it isn't.

Clarendon National apparently denied $1,791.73 in billings from the plaintiff provider based, at least in part, on its belief that plaintiff's assignor had lied about her daughter being in the insured vehicle at the time of the reported accident.  Although the decision does not indicate whether the daughter also made a no-fault claim to Clarendon, presumably she did, otherwise the mother's misrepresentation would be irrelevant.  Queens Civil granted judgment in favor of the plaintiff provider, and Clarendon appealed.

In affirming the Civil Court's order granting summary judgment to plaintiff, the Appellate Term, Second Department, ruled that since Clarendon was not contending that no accident occurred at all, or that the accident was staged, the assignor's alleged misrepresentation regarding her daughter's presence in the vehicle was irrelevant to the assignor's no-fault claim:

On appeal, defendant characterizes its defense as one based upon fraud and relies solely on A.B. Med. Servs. v State Farm Mut. Auto. Ins. Co. (3 Misc 3d 130[A], 2004 NY Slip Op 50575[U] [App Term, 9th & 10th Jud Dists 2004]), in which the Appellate Term for the Ninth and Tenth Judicial Districts held that the insurer "establish[ed] the existence of a triable issue of fact as to whether there was a lack of coverage because the alleged injuries did not arise from an insured incident (see Central Gen. Hosp. v Chubb Group of Ins. Cos., 90 NY2d 195, 199 [1997])." In the case at bar, defendant has not alleged that no motor vehicle accident occurred or that the accident was staged. Rather, defendant contends that it raised a triable issue as to whether the assignor's daughter was in the car at the time of the accident. However, contrary to defendant's contention, the assignor's alleged misrepresentation of the presence of her daughter in the car is irrelevant to the question of whether the assignor's injuries arose from an insured incident. Accordingly, as defendant failed to demonstrate the existence of a triable issue of fact in opposition to plaintiff's motion for summary judgment, the judgment is affirmed.

While I agree with the Appellate Term that lying about another no-fault claimant being in the vehicle is irrelevant to the narrow question of whether the liar's injuries were caused by the accident, such a lie is relevant to the insurer's investigation of who may be entitled to no-fault benefits for that accident and should bear some negative consequence on the liar's no-fault claim.  Otherwise, what incentive is there to each claimant to tell the truth?  Shouldn't there be one?  Why should the fraud in part, fraud in whole rule not apply to no-fault?  Someone please don't tell me it's because there's no fraud/misrepresentation condition in the PIP endorsement.

Let's say the assignor was driving, and it was a single vehicle accident.  The mother puts the daughter in the vehicle, giving the daughter a potential personal injury claim against the mother.  It would be an aberrant result indeed if the mother's lie about her daughter being in car -- and we're assuming for the sake of this point that it can be proven that the daughter was not in the car -- had no consequence on the mother's no-fault claim under the mother's personal auto policy, but negated liability coverage to the mother under that same policy with respect to her daughter's fraudulent personal injury claim in accordance with the Fourth Department's decisions in Nationwide v. Graham and Nationwide v. Posa.  Does that trouble anyone other than me?