Rate Evasion/Garaging Fraud -- Obtaining a Declaratory Judgment of No No-Fault Coverage Owed

NO-FAULT – AUTO POLICY – APPLICATION MISREPRESENATION – RATE EVASION – GARAGING FRAUD 

State Farm Fire & Cas. Co. v. AutoRx
(Sup. Ct., NY Co., 11/10/2021)

Here's a good example of successfully investigating, denying and litigating a rate evasion/garaging fraud case.  

Mikheal Bogle applies for an auto policy from State Farm in February 2019, representing on his application that he lives and garages his vehicle in Lake Peekskill, Orange County, New York. 

That was false.  Although he once lived in Lake Peekskill (once, as in 12 years earlier), in reality he lived and garaged his vehicle in Rosedale, Queens County, New York, approximately 60 miles away.  

Problem (for State Farm, not initially for Bogle): had Bogle truthfully disclosed the Rosedale garaging address, his 6-month auto policy premium would have been $4,483.82 more than what it was for the Lake Peekskill address he gave. 

On April 28, 2019, Bogle allegedly was injured in a motor vehicle accident (in New York City, of course) and treated with the defendant medical providers, who took assignments of benefits from him and billed State Farm.  After conducting Bogle's EUO, "State Farm timely denied the numerous claims for benefits (see 11 NYCRR 65-3.8[a][1]), concluding that, based on Bogle's testimony at the EUO and its own investigation, Bogle made material misrepresentations in his initial application for the issuance of the subject insurance policy with respect to where the insured vehicle was usually garaged and maintained in order to lower the cost of obtaining the policy, and that coverage was thus vitiated."

State Farm then commenced this affirmative declaratory judgment action to confirm its no-fault coverage denials.  None of the defendants appeared and State Farm moved for a default judgment against all of them.  

Finding that State Farm had not properly served the FDNY defendant (emergency responder), the court denied State Farm's motion for a default judgment.  

But finding proper service of process against all other defendants, the court reviewed State Farm's burden of proof on its motion and State Farm's proof and GRANTED default judgment to State Farm those non-appearing defendants declaring that State Farm "is not obligated to pay no-fault benefits to the defendant Mikheal Bogle in connection with injuries that he sustained in a motor vehicle accident on April 28, 2019, or to reimburse the defendants Autorx, LLC, CHC Chiropractic, P.C., Ocean Spine and Joint Medical Care, P.C., also known as Comprehensive Chiropractic Center, Kanwarpaul Grewal, D.O., JCB Acupuncture, P.C., Ocean Valley Physical Medicine, P.C., or Stand-Up MRI of Lynbrook for treatment that they rendered or equipment and supplies that they provided to him for those injuries[.]" 

The court explained: 

With respect to the proof of the facts constituting the claim, 

"CPLR 3215 does not contemplate that default judgments are to be rubber-stamped once jurisdiction and a failure to appear have been shown. Some proof of liability is also required to satisfy the court as to the prima facie validity of the uncontested cause of action (see, 4 Weinstein-Korn-Miller, NY Civ Prac paras. 3215.22-3215.27). The standard of proof is not stringent, amounting only to some firsthand confirmation of the facts" 

(Joosten v Gale, 129 AD2d 531, 535 [1st Dept 1987]; see Martinez v Reiner, 104 AD3d 477, 478 [1st Dept 2013]; Beltre v Babu, 32 AD3d 722, 723 [1st Dept 2006]). Stated another way, while the "quantum of proof necessary to support an application for a default judgment is not exacting ... some firsthand confirmation of the facts forming the basis of the claim must be proffered" (Guzetti v City of New York, 32 AD3d 234, 236 [1st Dept 2006]). In other words, the proof submitted must establish a prima facie case (see id.; Silberstein v Presbyterian Hosp., 95 AD2d 773 [2d Dept 1983]). 

"Where a valid cause of action is not stated, the party moving for judgment is not entitled to the requested relief, even on default" (Green v Dolphy Constr. Co., 187 AD2d 635, 636 [2d Dept 1992]; see Walley v Leatherstocking Healthcare, LLC, 79 AD3d 1236, 1238 [3d Dept 2010]). In moving for leave to enter a default judgment, the plaintiff must "state a viable cause of action" (Fappiano v City of New York, 5 AD3d 627, 628 [2d Dept 2004]). In evaluating whether the plaintiff has fulfilled this obligation, the defendant, as the defaulting party, is "deemed to have admitted all factual allegations contained in the complaint and all reasonable inferences that flow from them" (Woodson v Mendon Leasing Corp., 100 NY2d 62, 71 [2003]). The court, however, must still reach the legal conclusion that those factual allegations establish a prima facie case (see Matter of Dyno v Rose, 260 AD2d 694, 698 [3d Dept 1999]). 

Proof that the plaintiff has submitted "enough facts to enable [the] court to determine that a viable" cause of action exists (Woodson v Mendon Leasing Corp., 100 NY2d at 71; see Gray v Doyle, 170 AD3d at 971) may be established by an affidavit of a party or someone with knowledge, authenticated documentary proof, or by complaint verified by the plaintiff that sufficiently details the facts and the basis for the defendant's liability (see CPLR 105[u]; Woodson v Mendon Leasing Corp., 100 NY2d at 71; Gray v Doyle, 170 AD3d at 971; Voelker v Bodum USA, Inc., 149 AD3d 587, 587 [1st Dept 2017]; Al Fayed v Barak, 39 AD3d 371, 371 [1st Dept 2007]; see also Michael v Atlas Restoration Corp., 159 AD3d 980, 982 [2d Dept 2018]; Zino v Joab Taxi, Inc., 20 AD3d 521, 522 [2d Dept 2005]; see generally Mitrani Plasterers Co., Inc. v SCG Contr. Corp., 97 AD3d 552, 553 [2d Dept 2012]). 

Where an insured makes material misrepresentations on his or her application for insurance as to where he or she regularly garages a vehicle sought to be insured, coverage is defeated (see Remedial Med. Care, P.C. v Infinity Prop. & Cas. Co., 2017 NY Slip Op 50391 [U], 55 Misc 3d 130[A] [App Term, 2d, 11th & 13th Jud Dists, Mar. 31, 2017]; Jamaica Dedicated Med. Care, P.C. v Praetorian Ins. Co., 2015 NY Slip Op 50756[U], 47 Misc 3d 147[A] [App Term, 2d, 11th & 13th Jud Dists, May 6, 2015]; see also Liberty Mut. Ins. Co. v Mendez, 2021 NY Slip Op 30071[U], *4, 2021 NY Misc LEXIS 85, *6-7 [Sup Ct, N.Y. County, Jan. 7, 2021]; see generally State Farm Fire & Cas. Co. v Jewsbury, 169 AD3d 949, 950 [2d Dept 2019]). State Farm's proof establishes, prima facie, the facts underpinning its contentions, namely, that when Bogle first applied for insurance coverage on February 2, 2019, he represented that he resided at 93 Hollowbrook Road, Apartment 2, Lake Peekskill, New York 10537, and garaged the insured vehicle there, but actually lived at 244-07 136th Avenue, Rosedale, New York 11422, an address located in Queens County, and kept the vehicle garaged there, where premium rates are substantially higher than those for vehicles garaged in Lake Peekskill. 

As set forth in the affidavit of State Farm's claims specialist Tim Dacey, who investigated the claim, the subject collision occurred in Queens County, Bogle's Queens County address is listed on all no-fault benefit forms submitted by Bogle and the medical defendants, Bogle treated and received therapy in Queens County, Bogle is registered to vote at the Rosedale address in Queens County, and a video search revealed that all sightings of the insured vehicle were in Queens County and western Nassau County, with no sightings at or near Lake Peekskill. In addition, Dacey averred that a State Farm representative visited Bogle's Rosedale address, and confirmed with an occupant of those premises, a neighbor, and a postal delivery employee that Bogle resided there, while another representative visited the Peekskill Lake address, and was informed by a long-time resident at a neighboring address that he had never seen Bogle at the Peekskill Lake address identified on Bogle's application. Dacey further explained that the garaging the vehicle at the Queens County address costs $4,483.82 more, for each six-month period of coverage, than garaging the vehicle at Peekskill Lake. 

In fact, although Bogle procured the policy on February 2, 2019, he testified at his EUO on July 26, 2019 that he had resided solely at the Rosedale address since 2013, and that although he had lived in Peekskill Lake in 2007, he hadn't lived there since for 12 years. He averred that he receives all of his mail in Rosedale, has all of his credit cards issued to that address, and maintains of his personal property there. Bogle admitted that he had never garaged the insured vehicle in Peekskill Lake, but used that address on his application because of his poor driving record and his understanding that he would not be able to procure insurance had he used his actual residence address. 

The denial-of-claim statements show that the relevant denials of coverage were expressly based on the ground that Bogle made material misrepresentations in connection with his application for insurance with respect to the where the vehicle was regularly garaged in order to reduce her insurance premium rates. 

Hence, State Farm is entitled to a declaratory judgment against the defendants that were properly served with process.

See?  Rate evasion on a personal auto policy in New York CAN have negative first-party (physical damage/PIP/UM/UIM) coverage consequences provided, especially in a no-fault claim context, the suspected garaging fraud is timely identified and investigated (and coverage denied).