Chubb & Son, Inc. v. Consoli

• Decision Date: 22 May 2001
• Court: New York Supreme Court — Appellate Division
• Parties: CHUBB & SON INC. et al., Appellants,<BR>v.<BR>PIO CONSOLI et al., Defendants, and MELVIN STEINBERG et al., Respondents.

283 A.D.2d 297

726 N.Y.S.2d 398

CHUBB & SON INC. et al., Appellants,

v.PIO CONSOLI et al., Defendants, and MELVIN STEINBERG et al., Respondents.

Decided May 22, 2001.

Concur — Rosenberger, J. P., Nardelli, Andrias and Saxe, JJ.

This action is the aftermath of the conviction of Seymour B. Berson, a public adjuster, in Federal court on charges of mail and tax fraud in connection with a scheme in which he would fraudulently inflate insurance claims to increase his fee, ordinarily a percentage of the payment received by the insured. As part of this fraud, Berson had an arrangement with Nicholas Addesa, a former claim representative of plaintiff-appellant Chubb & Son Inc., an insurance company that controls Sea Insurance Company of America and Vigilant Insurance Company (collectively Chubb), by which Berson would pay Addesa to approve fraudulent claims. Addesa was convicted of defrauding Chubb.

Defendants Melvin and Marsha Steinberg (the Steinbergs) and Sidney and Elsie Stein (the Steins) held homeowner insurance policies issued by Chubb, and hired Berson, who worked through Jack DuBoff Associates, Inc., a company he owned and controlled, to prepare their claims for damages. Among other things, the policies contained the following "Concealment or Fraud" provision:

"We do not provide coverage for any insured who has intentionally concealed or misrepresented any material fact or circumstance relating to this insurance."

On July 27, 1988, the Steinbergs signed two sworn statements in proof of loss prepared by Berson, claiming a total of $148,564.25 in losses due to a fire at their house on June 13, 1988. On July 29, 1988, Chubb issued two checks totaling $148,314.25 to the Steinbergs, which checks they endorsed and deposited into their joint bank account. On February 3, 1988, the Steins also signed two sworn statements in proof of loss prepared by Berson, claiming losses due to damage from a broken water pipe, in the total amount of $46,086.48. In addition, on August 4, 1988, the Steins signed a sworn statement in proof of loss, claiming damages from a windstorm in the amount of $20,925. Chubb issued two checks totaling $46,086.48, on February 26, 1988, and a check for $20,925, on August 12, 1988, which checks the Steins endorsed and deposited into their joint bank account.

Berson admitted that the claims for both the Steinbergs and the Steins were deliberately inflated. Addesa admitted that based on the time frame, the claims for the Steinbergs and the Steins were "probably inflated," although he could not remember them specifically.

As a result of the Berson frauds, Chubb brought this action on July 12, 1994 against 22 insureds to recover amounts paid pursuant to their policies. After all the claims except those against the Steins and the Steinbergs were settled, Chubb moved for partial summary judgment on its common-law fraud claim on November 19, 1999. The IAS court denied the motion, finding "no law in New York that imposes absolute liability on an insured for the fraudulent acts of its adjuster." Chubb's motion should have been granted.

Defendants do not dispute the well-settled rule that a principal, even if innocent, is liable for acts of fraud that are within the scope of an agent's actual or apparent authority (see, 2A NY Jur 2d, Agency §§ 290,...