Material Misrepresentation defense

Alignment Chiropractic, P.C. v Travelers Home & Mar. Ins. Co., 2020 NY Slip Op 50994(U)(App. Term 2d Dept. 2020)

“A misrepresentation is material if the insurer would not have issued the policy had it known the facts misrepresented. To establish materiality as a matter of law, the insurer must present documentation concerning its underwriting practices, such as underwriting manuals, bulletins, or rules pertaining to similar risks, that show that it would not have issued the same policy if the correct information had been disclosed in the application” (Interboro Ins. Co. v Fatmir, 89 AD3d 993, 994 [2011] [internal quotation marks and citations omitted])”

“Upon a review of the record, we find that defendant failed to establish as a matter of law that it would not have issued the policy in question. Consequently, defendant did not demonstrate, prima facie, that the misrepresentation by plaintiff’s assignor was material”

It is so interesting how the fraudulent procurement defense transformed itself into the material misrepresentation defense”

Material misrepresentation

Commitment Care, P.T., P.C. v Travelers Home & Mar. Ins. Co., 2019 NY Slip Op 51157(U)(App. Term 2d De

“Upon a review of the record, we find that defendant failed to establish as a matter of law that it would not have issued the policy in question. Consequently, defendant did not demonstrate, prima facie, that the misrepresentation by plaintiff’s assignor was material.”

“What is noteworthy is that recent trend on fraudulent procurement has taken a turn to Ins Law 3105 and the Fatima case.”

Material Misrepresentation Defense unsuccessful

Maxford, Inc. v Erie Ins. Co. of N.Y., 2018 NY Slip Op 51057(U)(App. Term 2d Dept. 2018)

“Defendant cross-moved on the ground that plaintiff’s assignor had fraudulently procured the insurance policy in question by making a material misrepresentation on her policy application as to her place of residence and the principal location for the garaging of the vehicle which was to be insured. Upon a review of the record, we find that defendant failed to establish as a matter of law ” ‘that it would not have issued the same policy if the correct information had been disclosed in the application’ ” (Interboro Ins. Co. v Fatmir, 89 AD3d 993, 994 [2011], quoting Schirmer v Penkert, 41 AD3d 688, 691 [2007]; see Renelique v National Liab. & Fire Ins. Co., 53 Misc 3d 147[A], 2016 NY Slip Op 51615[U] [App Term, 2d Dept, 2d, 11th & 13th Jud Dists 2016]).

Defendant further asserts that plaintiff is collaterally estopped from maintaining the present action by virtue of an order, rendered on default, by the Civil Court, Queens County (Richard G. Latin, J.), in an action against plaintiff’s assignor, finding that the assignor had made “material and/or fraudulent misrepresentations” on her application for the insurance policy. However, the doctrine of collateral estoppel is not applicable here, as plaintiff was not named in the Civil Court, Queens County, action, and, thus, plaintiff was not in privity with the assignor (see Gramatan Home Invs. Corp. v Lopez, 46 NY2d 481, 486-487 [1979]; Magic Recovery Med. & Surgical Supply Inc. v State Farm Mut. Auto. Ins. Co., 27 Misc 3d 67, 69 [App Term, 2d Dept, 2d, 11th & 13th Jud Dists 2010]). In view of the foregoing, we reach no other issue.”

The second part of the opinion is old news.  Actually, so is the first part of the opinion.  The Appellate Term has gauged the fraudulent procurement defense under the Ins Law 3105(b) standard for the last 2-3 years,

Material Misrepresentations – Must follow the Ins Law 3105 rule

Liliya Veksler, LCSW, P.C. v Ameriprise Ins. Co., 2018 NY Slip Op 50741(U)(App. Term 2d Dept. 2018).

“In this action by a provider to recover assigned first-party no-fault benefits, plaintiff appeals from an order of the Civil Court which granted defendant’s motion for summary judgment dismissing the complaint upon the ground that plaintiff’s assignor had procured the insurance policy in question by making a material misrepresentation as to his place of residence.

“A misrepresentation is material if the insurer would not have issued the policy had it known the facts misrepresented. To establish materiality as a matter of law, the insurer must present documentation concerning its underwriting practices, such as underwriting manuals, bulletins, or rules pertaining to similar risks, that show that it would not have issued the same policy if the correct information had been disclosed in the application” (Interboro Ins. Co. v Fatmir, 89 AD3d 993, 994 [2011] [internal [*2]quotation marks and citations omitted]).

Upon a review of the record, we find that defendant failed to establish as a matter of law that it would not have issued the policy in question. Consequently, defendant did not demonstrate that the misrepresentation by plaintiff’s assignor was material.”

Clearly, Amerirpise thought it could avoid handing over the underwriting file.  For non AIP cases, these is fatal.  For AIP cases, I have learned that the rates are determined on a pre-set State schedule based upon residence.  Thus, you do not see the “underwriting file” play much of a role on those types of cases.  I suspect Ameriprise knew better, and almost slipped a fast one by the Courts.

Fraudulent procurement defense not substantiated

Quality Med. Care, PC v Progressive Cas. Ins. Co., 2017 NY Slip Op 50999(U)(Civ. Ct. Bronx Co. 2017)

I read this and I think the Court missed the issue, yet arrived at the result it should have.  First issue: a material misrepresentation defense (Ins Law 3105) does not require an intentional misrepresentation.  That said, second issue: proof must be adduced as to the rate difference,  Third issue: assuming it is not an AIP policy (statutory rates).  the underwriting manual must be entered into evidence.

The Court got lost on issue one and briefly addressed issue two (but never ruled on it) and failed to address issue three.

Too many moving pieces on these cases.

Point one: “The record is devoid of what actions, if any, the defendant took in regards to Ms. Murphy’s automobile insurance policy after having actual knowledge that she was residing in Jamaica, New York. Apparently, the defendant subsequent to the automobile accident decided to disclaim payment of Ms. Murphy’s medical bills on the purported basis that at the time the application for insurance was submitted by her that she provided a false residential address.”

Not a real issue.  Estoppel  is generally not a defense to a fraudulent procurement defense.  Perhaps now it is?  There is no case law on the topic.

Second issue: “there is no evidence attesting to her intent”  Irrelevant.

No testimony as to the rate difference:  “The best that this court can surmise, is that there must be a price differential in the policy premiums charged in Rochester, New York and Jamaica, New York, with the latter premiums being higher as this appears to be the motive attributed by defendant to the plaintiff’s assignor”

That is all she wrote on this one.

Georgia Law and New York law on material misrepresentations

JCC Med., P.C. v Infinity Group, 2016 NY Slip Op 26439 (App. Term 2d Dept. 2016)

(1) It is uncontroverted that defendant had issued a Georgia automobile insurance policy to the brother of plaintiff’s assignor, “effective from August 28, 2010 through August 28, 2011,” who had made various representations to defendant in his insurance application, including that he resided in Georgia, that the insured vehicle was garaged in Georgia, and that the assignor was an adult who resided in his Georgia household and also drove the insured vehicle.

(2) “Upon a review of the record, we find that defendant failed to show that there is a conflict between the laws of Georgia and New York with respect to the retroactive rescission of an automobile insurance policy which has been issued to a natural person for a private passenger vehicle, as both states prohibit the retroactive rescission of such a policy (see Vehicle and Traffic Law § 313; Matter of Government Empls. Ins. Co. v Nichols, 8 AD3d 564 [2004]; Matter of Eagle Ins. Co. v Singletary, 279 AD2d 56, 58 [2000]; see also Geogia Code Ann §§ 33-24-44, 33-24-45; Sentry Indem. Co. v Sharif, 248 Ga 395, 282 SE2d 907 [1981]; Liberty Ins. Corp. v [*2]Ferguson, 263 Ga App 714, 589 SE2d 290 [2003]; FCCI Ins. Group v Rodgers Metal Craft, Inc., 2008 WL 2951992, *7-8 [MD GA, July 28, 2008, No. 4:06-CV-107 (CDL)]; cf. T.J. Blake Trucking, Inc. v Alea London, Ltd., 284 Ga App 384, 643 SE2d 762 [2007] [the insurance policy was not issued to “a natural person” and, therefore, the policy could be retroactively rescinded pursuant to Georgia Code Ann § 33-24-7]).”

The plight of the innocent Assignor who entered a vehicle not knowing that it embodied the misrepresentation.

Material misrepresentation again

Joseph v Interboro Ins. Co., 2016 NY Slip Op 08050 (2d Dept. 2016)

(1) “Based on the information provided by McKayle, Karis completed an application for insurance, which said that the premises would be occupied by the plaintiffs as their primary residence. The plaintiffs signed the application, and thereafter, on the date of closing, a homeowners’ insurance policy was issued by the defendant Interboro Insurance Company (hereinafter Interboro). After a fire occurred at the premises, Interboro discovered that the plaintiffs did not occupy the premises as their primary residence and rescinded the policy, contending that the plaintiffs, through a material misrepresentation, induced Interboro to issue a policy that it normally would not have issued.”

(2) “A misrepresentation is material if the insurer would not have issued the policy had it known the facts misrepresented” (Interboro Ins. Co. v Fatmir, 89 AD3d at 994; see Insurance Law § 3105[b]; Novick v Middlesex Mut. Assur. Co., 84 AD3d at 1330; Varshavskaya v Metropolitan Life Ins. Co., 68 AD3d at 856). To establish materiality as a matter of law, the insurer must present documentation concerning its underwriting practices that show that it would not have issued the policy if the correct information had been disclosed in the application”

I will  pause at point number two since this important.  Many of the fraudulent procurement defenses seem to go awry on the Fatmir rule, that as originally constructed required the underwriting manual.  Seeing that this rule is overly onerous, Joseph now modifies this rule to require “documentation” covering the underwriting practices.

Fraudulent procurement has now been changed into a material misrepresentation defense

Renelique v National Liab. & Fire Ins. Co., 2016 NY Slip Op 51615(U)(App. Term 2d Dept. 2016)

It appears that Oleg Rybak has gotten his point across that the “fraudulent procurement” defense is really a material misrepresentation defense in disguise.  This defense has to fit within the parameters of Ins Law 3105 and be supported with proof from a underwriting manual.

“Defendant’s cross motion was based upon the ground that plaintiff’s assignor had procured the insurance policy in question by making a material misrepresentation as to his place of residence. As plaintiff argues, defendant failed to establish as a matter of law that the misrepresentation by plaintiff’s assignor was material (see Interboro Ins. Co. v Fatmir, 89 AD3d 993 [2011]). Consequently, defendant’s cross motion should have been denied.”

Proof of military status not enough on a material misrepresentation DJ

Healthy Way Acupuncture, P.C. v USAA Gen. Indem. Co., 2016 NY Slip Op 51342(U)(App. Term 1st Dept. 2016)

“While defendant submitted evidence showing that plaintiff’s assignor misrepresented his military status in the underlying insurance policy application, defendant is precluded from asserting that defense as a result of its untimely denial of the claim (see Westchester Med. Ctr. v GMAC Ins. Co. Online, Inc., 80 AD3d 603 [2011]; Gutierrez v United Servs. Auto. Assn., 47 Misc 3d 152[A], 2015 NY Slip Op 50797[U] [App Term, 2d, 11th & 13th Jud Dists]).”

The result here was preordained.

The Court comments on a copy and paste job

Infinity Ins. Co. v Nazaire, 2016 NY Slip Op 31454(U)(Sup. Ct. Kings Co. 2016)

This is a PA rescission case based upon a garaging issue.  The Court caught on to something interesting.  First, the EUO of the Defendant was not annexed to the moving papers.  Second, the Court found the investigator affidavit to be hearsay.

Third, the footnote said:

“The affidavit of the plaintiffs litigation specialist appears to be, in the antiquated words of one court, a “mere mechanical job of paste pot and shears” (TC. Theatre Corp. v Warner Bros. Pictures, 113 F Supp 265, 271 [SD NY 1953], rearg denied 125 F Supp 233 [SD NY 1953]). The boilerplate text of her affidavit is formatted in regular size font, while the variables are highlighted in bold size font to make it easier for her to make changes depending on the facts of a particular claim.  Her affidavit here does not have all of the correct variables. Notably, para  23 of her affidavit refers to one Nandslie Jean Louis as the policyholder, rather than Jude.”

Interesting read.  My advice to Plaintiff insurance carrier counsel: slow down and proof read.  Being a speed demon does not make friends in the judiciary…