New York County Supreme Court Grants Insurer's CPLR 3211(A)(1) Motion to Dismiss Plaintiff's Complaint Based on Insured's Failure to Submit Timely Proof of Loss

PROPERTY – BURST WATER PIPE-CAUSED WATER LOSS – PROOF OF LOSS REQUEST – MOTION TO DISMISS

Stein v. National General Ins. Co.
(Sup. Ct., NY Co., 6/9/2020)

Just when you thought you understood the "documentary evidence" basis of a CPLR 3211(a) pre-answer motion to dismiss, this decision issues.

In February 2018, Stein's Manhattan apartment sustained water damage from a burst water pipe.  National General investigated the loss and on April 15, 2019, paid Stein $30,519.82 for his loss. Unhappy with the amount of the loss payment, Stein hired a public adjuster, who inspected the loss and estimated the claim at $404,977.78.  National General declined to enter into an appraisal and, on July 9, 2019, sent a demand to Stein for a signed sworn proof of loss to be provided within 60 days.

On October 24, 2019, National General wrote to Stein, denying coverage for his claim based on various grounds, including Stein's failure to submit a signed sworn proof of loss within 60 days. Stein brought this action on February 18, 2020, alleging breach of contract and breach of the covenant of good faith and fair dealing.

In lieu of answering the complaint, National General moved on March 6, 2020 to dismiss Stein's complaint based on CPLR 3211(a)(1) (documentary evidence) and 3211(a)(7) (failure to state cause of action).  In support of its motion, National General submitted its attorney's affirmation with exhibits and a memorandum of law.  The exhibits attached to its attorney's affirmation were:

• a copy of the complaint;
• a copy of the relevant insurance policy;
• a copy of National General’s "Disclaimer of Coverage"; 
• copies of emails exchanged between National General and Stein’s public adjuster, Scott Modlin; 
• copies of emails exchanged between Stein and Modlin; 
• copies of emails sent by Modlin to National General and its representatives; 
• a copy of National General’s May 28, 2019 "Request for Information and Examination under Oath (“EUO”) demand"; 
• a copy of relevant sections of Stein’s testimony at his September 10, 2019 EUO; 
• a copy of National General’s June 24, 2019 letter requesting information and demanding an EUO; 
• a copy of National General’s July 15, 2019 letter requesting information and demanding an EUO; 
• a copy of a July 26, 2019 letter from Stein’s previous attorney; and
• a copy of National General’s July 9, 2019 letter demanding a signed, Sworn Statement in Proof of Loss, as well as the July 10, 2019 delivery receipt from Federal Express.

Stein opposed National General's motion to dismiss on two bases: (1) that National General's motion pursuant to CPLR 3211(a)(1) relied upon Stein's deposition testimony and, therefore, was not properly founded upon "documentary evidence"; and (2) National General should not be permitted to disclaim coverage as it only sent its proof of loss demand to Stein and not to his public adjuster.

In rejecting these arguments and GRANTING the motion, Supreme Court held:

These submissions conclusively resolve all factual issues as a matter of law and conclusively disposes of the plaintiff's claims for breach of contract and breach of the duty of good faith and fair dealing inasmuch as it is well settled that a plaintiff's "failure to file proof of loss within 60 days after receipt of defendant's notice is an absolute defense to an action on the policy, absent waiver of the requirement by the insurer or conduct on its part estopping its assertion of the defense." Hunter v Seneca Ins. Co., 114 AD3d 556, 557 (2014) citing Igbara Realty Corp. v New York Prop. Ins. Underwriting Assn., 63 NY2d 201, 209-210 (1984).  

In opposition, the plaintiff argues (i) that the defendant's motion pursuant to CPLR 3211(a)(1) relies upon the plaintiff's deposition testimony, and therefore is not properly founded upon documentary evidence, and (ii) the defendant should not be permitted to disclaim coverage as it only sent the demand to the plaintiff, not his insurance adjuster. The plaintiff's contentions are without merit. Contrary to the plaintiff's first contention, the defendant's submission of its demand of proof, with service, and the subsequent disclaimer of coverage are sufficient to establish the plaintiff's failure to respond within the 60-day time limit. See Hunter v Seneca Ins. Co., supra. Moreover, on a motion to dismiss pursuant to CPLR 3211(a)(1), documentary evidence may be supplemented by affidavits or deposition testimony that are not disputed. See Rosenbaum, Rosenfeld & Sonnenblick, LLP v Excalibur Grp. NA, LLC, 146 AD3d 489 (1 Dept. 2017). As the plaintiff does not dispute, in his deposition testimony or his opposition papers, that he did not timely respond to the defendant's demand, the court may properly rely on such evidence. See id. 

Furthermore, to the extent that the plaintiff contends that the defendant's failure to serve its demand on his adjuster constitutes a defense to this motion, such an argument is contrary to the plain language of New York Insurance Law § 3407, which only requires service of the demand be made upon the insured. Therefore, the plaintiff fails to rebut the documentary evidence submitted by the defendant, and dismissal pursuant to CPLR 3211(a)(1) is granted. 

As the action is dismissed pursuant to CPLR 3211(a)(1), the court does not reach the portion of the defendant's motion seeking to dismiss the complaint pursuant to CPLR 3211(a)(7).

Can this decision be reconciled with the Bonavita v. GEICO decision that I blogged about last week?  Is it because Stein did not dispute that he failed to submit a timely proof of loss?  Tell me what you think in the comments below.

As of the date of this post, no notice of appeal has been filed.  

NYSSIU Legal Update 2019-2020 Edition

 LEGAL UPDATE

I have been privileged since incorporating the New York State Chapter of Special Investigation Units (NYSSIU) in 1997 to serve as its Counsel.  Many times I have prepared and presented the NYSSIU Legal Update to members and guests at NYSSIU meetings.  Some of those updates even made it to NYSSIU's website.  

On May 6, 2020, my son Ryan Mura prepared and virtually presented the 2019-2020 edition of the NYSSIU Legal Update.  That edition digests eight no-fault, six property and two criminal law case decisions, as well as providing updates on New York legislative and regulatory developments affecting New York property and casualty insurers. 

You can read that Legal Update here.  Case decisions are hyperlinked within.  Questions can/should be directed to Ryan.

That's Incredible! (as a Matter of Law)

HOMEOWNERS – PROOF OF LOSS CONDITION – SUMMARY JUDGMENT 

Finley v. Erie and Niagara Ins. Assn.
(4th Dept., 6/15/2018)

Russell Finley's home burned down.  As was its contractual right under the policy, his property insurer, Erie and Niagara Insurance Association, requested a sworn proof of loss and denied coverage when it did not receive that proof of loss within the policy's required 60-day period.  Finley sued and testified during his deposition that he had timely submitted the requested proof of loss.

Anyone involved in litigation knows that credibility ordinarily is a issue of fact for the factfinder(s) at trial.  But are there ever instances in which a court may properly determine credibility as a matter of law?

Yes, reminds the Fourth Department, because motion and appellate courts are not required to shut their eyes "to the patent falsity of a defense."

Erie and Niagara successfully moved for summary judgment on its breach of the policy's proof of loss condition defense, and Finley appealed.  In affirming summary judgment to the insurer, the Appellate Division, Fourth Department, held:

We reject plaintiff's contention that the court erred in granting the motion. "It is well settled that the failure to file sworn proofs of loss within 60 days of the demand therefor constitutes an absolute defense to an action on an insurance policy absent a waiver of the requirement by the insurer or conduct on its part estopping its assertion of the defense' " (Bailey v Charter Oak Fire Ins. Co., 273 AD2d 691, 692 [3d Dept 2000]; see Igbara Realty Corp. v New York Prop. Ins. Underwriting Assn., 63 NY2d 201, 209-210 [1984]; Alexander v New York Cent. Mut., 96 AD3d 1457, 1457 [4th Dept 2012]). Defendant, as the party seeking summary judgment, met its initial burden on the motion by establishing that plaintiff failed to provide a sworn proof of loss within the requisite time (see generally Schunk v New York Cent. Mut. Fire Ins. Co., 237 AD2d 913, 914 [4th Dept 1997]), and that defendant did not waive the requirement. In response, plaintiff failed to raise a triable issue of fact whether he substantially complied with the proof of loss requirement (cf. Delaine v Finger Lakes Fire & Cas. Co., 23 AD3d 1143, 1144 [4th Dept 2005]).  

We reject plaintiff's contention that he raised a triable issue of fact by submitting his deposition testimony in which he averred that he timely submitted the requisite proof of loss to defendant, and that the court made an improper credibility determination in rejecting that testimony and his testimony regarding a lack of knowledge of the cause of the fire. Although "we agree with the general premise that credibility is an issue that should be left to a [factfinder] at trial, there are of course instances where credibility is properly determined as a matter of law'" (Sexstone v Amato, 8 AD3d 1116, 1116 [4th Dept 2004], lv denied 3 NY3d 609 [2004]). Neither this Court nor the motion court is " required to shut its eyes to the patent falsity of a defense' " (id., quoting MRI Broadway Rental v United States Min. Prods. Co., 242 AD2d 440, 443 [1st Dept 1997], affd 92 NY2d 421 [1998]). Here, we conclude that the court properly determined that plaintiff's deposition testimony was "self-serving and incredible on these points, permitting summary judgment in favor of" defendant (Curanovic v New York Cent. Mut. Fire Ins. Co., 307 AD2d 435, 439 [3d Dept 2003]; see Rickert v Travelers Ins. Co., 159 AD2d 758, 759-760 [3d Dept 1990], lv denied 76 NY2d 701 [1990]).

That's a lot of rejecting.  Next time someone tells you credibility is always a fact issue, point them here.  Self-serving testimony and patently false defenses do not triable issues of fact create.

You can watch (and listen) to the oral argument of this appeal to the Fourth Department here.  Perhaps my favorite statement from Justice Troutman at 1:26:33:  "So he complied until he didn't."

Homeowner Insurer's Failure to Timely Respond to Insured's Proof of Loss or Send 90-Day Delay Letters Does Not Preclude Exclusion-Based Coverage Defenses

PROPERTY – HOMEOWNERS – PROOF OF LOSS – REGULATION 64 – 90-DAY DELAY LETTERS – DEFENSE PRECLUSION
Mallory v. Allstate Ins. Co.
(2nd Dept., decided 12/6/2011) 

Section 216.6 (c) of New York Insurance Regulation 64 (Title 11 NYCRR Part 216) requires an insurer, "[w]ithin 15 business days after receipt by the insurer of a properly executed proof of loss and/or receipt of all items, statements and forms which the insurer requested from the claimant," (30 days if the insurer suspects that the claim involves arson) to advise a claimant, or a claimant's representative, in writing, (1) of its acceptance or rejection of the claim, or (2) that it needs more time to determine whether the claim should be accepted or rejected. Thereafter, if the claim remains unsettled, unless the matter is in litigation or arbitration, the insurer must, 90 days from the date of the initial letter setting forth the need for further time to investigate, and every 90 days thereafter, send to the claimant or the claimant's authorized representative a letter setting forth the reasons additional time is needed for investigation.  These letters are sometimes called "delay letters" by property claims representatives.

What if the insurer fails to comply with this regulatory requirement by not responding to the insured's proof of loss or claim submission or sending the 90-day delay letters within the required time period?  Is the insurer precluded from raising and relying on policy exclusions to deny coverage?  No, says the Appellate Division, Second Department.  Again.

Plaintiff commenced this action to recover the proceeds of a fire insurance policy. Allstate asserted several affirmative defenses based on policy exclusions. Plaintiff moved to dismiss Allstate's exclusion-based affirmative defenses on the ground that it was precluded from raising those defenses because of its failure to comply with 11 NYCRR § 216.6(c) in processing the plaintiff's claim.  Supreme Court denied plaintiff's motion and, reaffirming its 2004 decision in De Marinis v Tower Ins. Co. of N.Y., the Appellate Division AFFIRMED:

In De Marinis v Tower Ins. Co. of N.Y. (6 AD3d 484, 486-487), this Court held that a failure to comply with 11 NYCRR 216.6(c) does not preclude an insurance company from relying on a policy exclusion to disclaim coverage. We decline the plaintiff's invitation to overrule De Marinis. Accordingly, the plaintiff did not demonstrate that the defenses were without merit as a matter of law (see CPLR 3211[b]; Galasso, Langione & Botter, LLP v Liotti, 81 AD3d 880, 882). 

The potential consequence of not complying with 216.6(c) is administrative sanction, not defense preclusion.

Editor's Note (02.07.14) ~~  The New York Court of Appeals unanimously AFFIRMED this decision on August 28, 2012, holding:

Under the facts of this case, the Appellate Division correctly determined that an insurer's failure to comply with 11 NYCRR 216.6 (c) in processing a claim does not preclude that insurer from relying upon a policy exclusion to disclaim coverage.

Leave to Amend Answer to Assert Fraudulent Proof of Loss Defense Granted

HOMEOWNERS – PROPERTY – LEAVE TO AMEND ANSWER – FRAUDULENT CLAIM EXAGGERATION
Forsythe v. Otsego Mut. Fire Ins. Co.
(1st Dept., decided 3/23/2010)

Two years after answering plaintiffs' complaint, defendant Otsego Mutual Fire Insurance Company moved for leave to amend its answer to assert a fraud affirmative defense and for summary judgment based on that defense.  Otsego Mutual contended that plaintiffs' proof of loss was fraudulently overstated.  New York Supreme (Jane S. Solomon, JSC) denied Otsego's motion in all respects and Otsego Mutual appealed.

In MODIFYING the lower court's order to grant leave to Otsego Mutual to amend its answer but sustaining the lower court's denial of summary judgment, the Appellate Division, First Department held:

Although defendant did not move for leave to amend until approximately two years after it answered the complaint, plaintiffs do not show, or even allege, prejudice or surprise as a result of the delay (see CPLR 3025[b]; Arellano v HSBC Bank USA, 67 AD3d 554 [2009]).

However, defendant failed to demonstrate as a matter of law that plaintiffs' proof of loss was fraudulent (see Saks & Co. v Continental Ins. Co., 23 NY2d 161, 164-165 [1968]). Plaintiffs' explanation for their overvaluation of the loss, that the house was uninhabitable and all their furniture destroyed, raises an issue of fact whether they intended to defraud defendant (see Latha Rest. Corp. v Tower Ins. Co., 38 AD3d 321 [2007], lv denied 9 NY3d 803 [2007], cert denied 552 US 1010 [2007]; Kyong Nam Chang v General Acc. Ins. Co. of Am., 193 AD2d 521 [1993]). 

I've posted before that obtaining summary judgment on a fraudulent claim exaggeration defense is difficult.   Intent to defraud and materiality are issues that often involve questions of fact, requiring a trial.  The Saks & Co. v. Continental Ins. Co. case, cited by the First Department, involved an appeal and reversal of a bench trial verdict, not a pre-trial motion for summary judgment.  Still, the opening section of the New York Court of Appeals' 1968 decision in the Saks case is worth repeating: 

There is an old saying that "clothes make the man". This aphorism must have been coined (to jumble a metaphor) with the plaintiff, here, one Khaibar Khan Goodarzian, in mind.*fn1 Mr. Goodarzian's life-style can only be characterized as extravagant and flamboyant. His manner of living is typified by his wardrobe. The different types of clothing and the numbers of each type which Mr. Goodarzian claimed to have possessed is simply staggering. 

To accommodate his inventory of clothing, Goodarzian converted a bedroom of his Fifth Avenue apartment into a wardrobe room in which closets lined all four walls; a bathroom was made into a shoe closet.  Goodarzian's extravagance for clothing is amply documented in the record and supports his self-proclaimed title of the "World's Best Dressed Man".  He even went so far as to monogram his clothing with the initials WBDM, an acrostic made up of the first letters of his title. 

Mr. Goodarzian sued the defendant insurance companies for $411,952, the full coverage of the policies issued by the companies, alleging that he had sustained a loss of $985,000 as a result of a fire which occurred in his apartment in the early morning hours of November 4, 1961 while he was entertaining a group of friends at a plush nightclub. Earlier in the evening, he had been a host to an even larger group at his apartment.  Goodarzian claimed that various items of clothing, furniture, fixtures, betterments and improvements, valuable jewelry and Persian rugs were damaged, destroyed, or lost and missing as a consequence of the fire and that the loss to his property amounted to approximately $985,000. The defendants did not dispute the value placed on the property allegedly lost by the plaintiff, but resisted his claim on the ground that items included in the proof of loss, submitted as the basis for recovery under the policies, included many which were not in the apartment on the night of the fire. 

The policies issued to Goodarzian insured him against fire for the contents of his apartment to the extent of $341,000 and $57,000 for theft and mysterious disappearance.*fn2 The insured claimed that there was destruction to "in-sight" property amounting to $92,625, improvements and betterments amounting to $9,437, in debris $750, lost and missing $132,518, jewelry $745,300 and additional living expense $4,500. Goodarzian accordingly claimed the full amount of his insurance coverage to partially compensate him for his loss.

The case was tried without a jury, and the Trial Judge awarded judgment to the plaintiff for $104,316. (The sum embraced $35,645 for clothing, $17,702 for carpeting, $37,482 for damage to furnishings, and $13,487 for destruction of betterments and improvements.) The Trial Judge stated that "Claims for the other items as lost and missing are not allowed because of failure of proof by the plaintiffs." 

The Appellate Division (First Department) unanimously reversed and dismissed the plaintiff's complaint, finding as a matter of law that the proof of loss was fraudulent. We affirm.

Insured's Failure to Cooperate with Insurers' Investigation of Reported Jewelry Robbery Voids Coverage

JEWELER'S BLOCK INSURANCE – BROKER'S CANCELLATION CLAUSE – PREMIUM FINANCE AGREEMENT – NEW YORK BANKING LAW § 576 – NON-COOPERATION
D&R Plaza Jewelry v. Those Lead Underwriters at Bellmarine, S.A.
(Sup. Ct., Kings Co., decided 10/16/2008)

There's a lot in here, so be sure to read this decision if you're on the property side of the P&C equation.

Jeweler's (or "jeweller's" if you're across the pond) block insurance is all-risk specialized insurance coverage for jewelers. There are usually certain preconditions or requirements that must be met, such as safes, alarms, surveillance systems, and regular inventories, for the coverage to be available in case of a loss.

D&R Plaza Jewelry in Brooklyn had a jeweler's block insurance policy with the defendants. The policy limit was $500,000, which increased pursuant to policy terms to $1,000,000 for the months November, December and January. Plaintiff used a premium finance company, Standard Funding Corporation, to make the annual premium payment, and the finance agreement listed SJ International Brokers as the insured's agent. The finance agreement also appointed Standard as D&R's attorney-in-fact and authorized Standard to cancel the policy if D&R failed to make the $963.53 monthly payments to Standard as agreed.

Standard did not received D&R's fourth monthly payment and issued a cancellation notice dated December 2, 2005 to D&R but addressed to SJ. The effective date of the cancellation was December 3, 2005. Standard apparently did not send a copy of the cancellation notice to defendants, and D&R alleged that it did not receive the cancellation notice until after its effective date. D&R also alleged that it had issued a check to its broker, SJ, on December 1, 2005, which was sent to Standard and posted to its account on December 9, 2005.

On December 11, 2005, D&R reported to the NYPD's 63rd Precinct that $400,000 to $500,000 of jewelry had been stolen from its store. D&R reported the theft to SJ on December 12. Defendants immediately retained an insurance adjuster, Donald Yick, who contacted David Shimunov, D&R's one-half owner, on December 12 and instructed him to close the store to business and activate the alarm until December 15, 2005, when Yick was to interview Simunov and conduct a post-loss inventory. Yick met with Shimunov and Roman Khaimov, D&R's other one-half owner of plaintiff, on December 15.

According to Yick, during his investigation of the insurance claim he learned that the alarm system had not been activated on December 12, contrary to Yick's instructions. Yick was advised that an employee, Nathan Kataev, was also in the store the evening of the alleged robbery, but was unable to appear at the December 15 meeting because he was preparing for a trip to Russia through the end of January 2006. Yick claimed he requested that he be contacted upon Kataev's return to schedule an interview, but was never contacted by the insured regarding Kataev's return. Khaimov also informed Yick that, along with his father, Ilya Khaimov, he had entered the store between December 12 and 15, worked on the inventory, and Ilya Khaimov had removed merchandise from the premises that was allegedly on consignment from Ilya Khaimov's own jewelry manufacturing company. While Yick viewed a video of the alleged robbery that was recorded on the store's surveillance system and requested a copy of the video from Shimunov, the plaintiff never provided Yick with a copy of the video. At the December 15 meeting, Yick presented Shimunov with a statement regarding the loss for his review and signature and, despite numerous requests for the signed document, Shimunov did not sign the statement until May 29, 2008, for inclusion in plaintiff's opposition to defendants' motion for summary judgment. Yick also requested a formal written claim detailing the alleged loss along with a copy of the physical inventory per the Policy.

In May of 2006, Yick contacted Shimunov and Khaimov through the cell phone numbers provided at the December 15, 2005 meeting and indicated that specific documents were still needed to substantiate plaintiff's claims. Both agreed to appear for an interview. However, neither appeared at the scheduled place and time. Yick claimed in his affidavit in support of the motion that he had made several subsequent attempts to interview Shimunov and Khaimov, left three messages on the voicemail of Shimunov's cell phone, and never received a response from either individual. Yick sent plaintiff's broker, SJ, a written request for a formal claim and documents, including the most recent inventory conducted, on January 16, 2006. When the plaintiff did not respond to Yick's requests, Yick followed up with interviews of SJ's employees and three visit's to SJ's offices to obtain the file on the claim. SJ did not provide Yick with the file and was unwilling to cooperate in the investigation.

John Kim ("Kim") was the certified public accountant hired to assist in the post-loss inventory. According to Kim's affidavit in support of the motion, he sent a letter to D&R and SJ on January 16, 2006 that included a copy of the count sheets from the physical inventory. The letter requested a number of inventory documents, bank statements, invoices and tax returns from the plaintiff. A follow up letter from Kim was addressed to Shimunov at his personal address on February 17, 2006. Kim wrote to SJ on February 28, 2006, March 1, 2006, and May 4, 2006 indicating that he had been unable to reach Shimunov and requested that the letter be forwarded to Shimunov. On May 8, 2006, Lenny Madowicz of SJ wrote to Kim indicating that D&R was gathering the requested documents and they would be provided within 30 days. Kim never received the documents requested from either the plaintiff or SJ.

Plaintiff commenced this action on December 7, 2006, just before the one-year limit to file suit on the policy expired (under New York law, property policies covering other than fire and lightning losses are not required to provide a two-year suit limitations period and may provide for a shorter period). Plaintiff's complaint alleged that it had sustained a theft loss of jewelry in the amount of $1,000,000, the policy limit. Defendants answered and asserted various affirmative defenses, including that the policy had been cancelled before the loss, the insured's breach of the policy's cooperate requirement, its failure to submit a sworn proof of loss, and its misrepresentation and concealment of material facts. Defendants eventually moved for summary judgment on the cancellation, proof of loss, and non-cooperation grounds.

In denying defendants' motion based on their pre-loss policy cancellation ground, Kings County Supreme Court Justice Carolyn Demarest found that defendants had not established that the policy was properly cancelled before December 11, 2005 because: (1) Standard had not sent a copy of its cancellation notice to defendants, as required by the policy's "Broker's Cancellation Clause"; and (2) Standard had not complied with the cancellation notice requirements of New York Banking Law §576, which requires a premium finance agency to provide not less then ten days written notice (13 days if mailed) to an insured of the intent to cancel the policy.

On defendants' proof of loss defense, Justice Demarest held:

Although defendants' agent, Yick, provided an affidavit averring that he personally gave Shimunov a copy of a printed statement regarding the loss and requested that Shimunov complete and return the document, defendants have not demonstrated that they provided blank proof of loss forms as required under Insurance Law § 3407 [a] (Ingarra v General Accident/PG Ins. Co., 273 AD2d 766, 767 [3d Dept 2000]; Medical Facilities, Inc. v Pryke, 172 AD2d 338 [1st Dept 1991] (holding that insurer failed to meet the requirement of Insurance Law § 172 (now § 3407) by providing insured with proof of loss forms filled in with amounts instead of blank forms as required by statute)). Plaintiff's failure to provide a proof of loss statement within 60 days of the alleged loss does not, therefore, require dismissal of plaintiff's action.

The court did, however, grant summary judgment to the defendant insurers based on their non-cooperation defense:

Paragraph A, E and J of the conditions precedent of the Policy required the plaintiff to provide the defendants with records and various documentation as well as to submit to an examination under oath in the event of a loss as follows: A. The Assured shall keep detailed records of all sales, purchases and other transaction, and that such records shall be available for inspection by the Underwriters or their representative in case of a claim being made under this Policy. (Emphasis added) E. The Assured shall in case of loss or damage and as a condition precedent to any right of indemnification in respect thereof give to the Underwriters, via the negotiating brokers, such information and evidence as to the property lost or damaged and the circumstances of the loss or damage as the Underwriters may reasonably require and as may be in the Assured's power. (Emphasis added) J. The Assured shall in the event of loss or damage and as per Underwriters' request submit to an examination under oath by any persons authorized by the Underwriters relative to any and all matters concerning the claim and subscribe to the same; and shall produce for examination all books of accounts, bills, invoices and other vouchers or certified copies thereof if originals be lost, at such reasonable time and place as may be designated by Underwriters or its representatives and shall permit extracts and copies thereof to be made. (Emphasis added) The defendants undertook diligent efforts that were reasonably calculated to bring about plaintiff's cooperation with regard to Paragraphs A, E and J by sending letters to the plaintiff at the personal address of Shimunov, sending letters and faxes to the plaintiff's broker, setting up interviews with Shimunov and Khaimov, leaving phone messages on the personal phone number of Shimunov, and making multiple appearances at the office of the plaintiff's broker to review the claim file. As noted above, defendants' attempts were futile. The pattern of noncooperation and unexplained delay, which continued for over two years, was clearly persistent and unreasonable.

Although Shimunov states in his amended affidavit that he was at all times willing to appear for an examination under oath, he did not dispute Yick's statement that he did not appear for an interview as scheduled in May 2006 or deny receiving Kim's February 17, 2006 letter request for documentation. The only explanation offered for the delay is David Shimunov's reference to his prior attorney's suspension on October 10, 2006, prior to commencement of suit, and his "ex-partner[ s]" attempt to intervene in this action by separate counsel, neither of which would have logically influenced his ability to co-operate with defendants' investigation prior thereto. Mr. Shimunov also makes reference to his conviction for possession of counterfeit funds as having created a depression for which he has been taking medication. This court does not find such excuses sufficient to justify plaintiff's failure to provide defendants with the documentation as required under the Policy. Despite defendants' numerous attempts addressed to both Mr. Shimunov and Mr. Khaimov, to obtain documentation regarding the inventory at the time of the alleged robbery, the documentation was still not provided as of March 26, 2008, the day this motion was filed. It is noted that neither Mr. Khaimov, a fifty percent owner of plaintiff, nor the broker S.J., has provided any explanation for their failure to co-operate with the investigation. It was plaintiff's burden under the Policy to support its claim in a timely fashion so as to afford defendants the opportunity to verify both the fact of the loss and its value. It did not meet such burden.

At times, insureds are given a second chance, but "[t]he delay and avoidance here has precluded any possibility of obtaining anything but stale information" (Levy v Chubb Ins., 240 AD2d 336, 338 [1st Dept 1997]). Plaintiff's non-co-operation is held to be wilful as the defendant demonstrated that the plaintiff's failure to co-operate was persistent (see Levy v Chubb Ins., 240 AD2d at 337). Plaintiff's continued failure to provide the defendants with the requested inventory records, purchase records, list of the property allegedly lost, information as to Kataev's availability for an interview, and Shimunov and Khaimov's failure to appear for an interview without a valid explanation or excuse constituted a material breach of the Policy which precludes plaintiff's recovery (see Cabe, 153 AD2d at 653; Pizzirusso, 143 AD2d at 340; Bulzomi, 92 AD2d at 878; 232 B'way Corp., 206 AD2d at 419). The belated attempt by Shimunov to provide the requested documentation cannot cure the actual prejudice to defendants caused by the extended delay and the ultimate failure to co-operate by providing access to witnesses with relevant knowledge.

Leave Granted to Add Proof of Loss Defense

PROPERTY – PROOF OF LOSS – INSURANCE LAW § 3407(a)
Gongolewsky v Empire Ins. Co.
(2nd Dept., decided 5/13/2008)

Empire denied coverage for for a water loss to plaintiff's home, and she sued. Empire moved for leave to amend its answer to assert a defense based on the insured's alleged failure to file a timely proof of loss, and for summary judgment on that defense.

In MODIFYING the lower court's order, the Second Department held that Empire should have been allowed to amend its answer to assert a defense based on Insurance Law § 3407(a), and that such a defense is not waived if not included in the original answer.

The appellate court agreed, however, with the lower court's denial of summary judgment to Empire, noting:

Empire failed to demonstrate, prima facie, that a due demand for a proof of loss was made upon the plaintiff (citation omitted). Rather, the letter by which the demand was made came from attorneys identifying themselves as counsel for "Allcity Insurance Company," which is apparently a legally distinct sister company to Empire. Nonetheless, the letter did properly identify the property and the policy number. Thus, neither party demonstrated its prima facie entitlement to judgment as a matter of law on the issue of whether Insurance Law § 3407(a) was complied with[.]

Add this to a number of other New York cases in which courts have held that to expect compliance with a policy's proof of loss condition, the insurer must strictly follow the required procedures of Insurance Law § 3407(a) and its policy. Anything other than perfect clarity and precision in making the request for POLs may preclude summary judgment from being granted to the insurer.