Denial of Summary Judgment to Property Insurer on its Material Misrepresentation Defense Affirmed

COMMERCIAL PROPERTY – MATERIAL MISREPRESENTATION – SUMMARY JUDGMENT
Classon Realty Corp. v. Tower Ins. Co. of N.Y.
(2nd Dept., decided 12/8/2009)

It's tough winning summary judgment on a fraud/material misrepresentation defense during a first-party action.  Intent to defraud and materiality are issues that often involve questions of fact, requiring a trial.  Such was the case in this matter. 

Tower denied first-party property coverage to the plaintiff based , at least in part, on what Tower contended were the insured's material misrepresentations during Tower's investigation of the insured's claim.  The insured commenced this breach of contract action against Tower, and Tower moved for summary judgment on its material misrepresentation defense.

In AFFIRMING Kings Supreme's denial of Tower's motion, the Second Department held:

The proponent of a motion for summary judgment must establish its entitlement to judgment as a matter of law by demonstrating that there are no triable issues of fact (see Winegrad v New York Univ. Med. Ctr., 64 NY2d 851, 853). The defendant failed to demonstrate that there are no triable issues of fact regarding whether the plaintiff insured made material misrepresentations during the defendant's investigation of the plaintiff's claim (see Christophersen v Allstate Ins. Co., 34 AD3d 515; Fine v Bellefonte Underwriters Ins. Co., 725 F2d 179, 183, cert denied 469 US 874). Accordingly, the Supreme Court properly denied the defendant's motion for summary judgment dismissing the complaint.

Christophersen involved a fraudulent claim exaggeration defense.  Allstate contended that the insured had attempted to defraud Allstate by including inaccurate information in his sworn proofs of loss.  In affirming the motion court's denial of Allstate's request that it search the record and award it summary judgment, the Second Department reiterated several principles applicable to first-party property insurers' fraud and material misrepresentation defenses:

A policy of insurance is vitiated where the insured has " 'willfully and fraudulently placed in the proofs of loss a statement of property lost which he did not possess, or has placed a false and fraudulent value upon the articles which he did own' " (Saks & Co. v Continental Ins. Co., 23 NY2d 161, 165 [1968], quoting Domagalski v Springfield Fire & Mar. Ins. Co., 218 App Div 187, 190 [1926]). However, "unintentional fraud or false swearing or the statement of any opinion mistakenly held are not grounds for vitiating a policy" (Sunbright Fashions v Greater N.Y. Mut. Ins. Co., 34 AD2d 235, 237 [1970], affd 28 NY2d 563 [1971]). While there is no question that the plaintiff gave the defendant Allstate Insurance Company (hereinafter Allstate) inaccurate information in his original proof of loss statements, a triable issue of fact exists as to whether the plaintiff thereby intended to defraud Allstate (see e.g. St. Irene Chrisovalantou Greek Orthodox Monastery v Cigna Ins. Co., 226 AD2d 624 [1996]; cf. Pipo Bar & Rest., Inc. v Certain Underwriters at Lloyd's at London, 15 AD3d 556, 557 [2005]; Rickert v Travelers Ins. Co., 159 AD2d 758, 760 [1990]).

Further, a triable issue of fact exists regarding whether the plaintiff's other alleged misrepresentations were sufficiently material to warrant the denial of coverage under the policy. Indeed, "[t]he issue of materiality is generally a question of fact for the jury [and] . . . [c]onclusory statements by insurance company employees . . . are insufficient to establish materiality as a matter of law" (Parmar v Hermitage Ins. Co., 21 AD3d 538, 540-541 [2005]; see Lenhard v Genesee Patrons Co-op. Ins. Co., 31 AD3d 831 [2006]).