Azzato v. Allstate Ins. Co.

• Decision Date: 03 October 2012
• Citation: 99 A.D.3d 643,951 N.Y.S.2d 726,2012 N.Y. Slip Op. 06571
• Parties: Raymond AZZATO, et al., respondents, v. ALLSTATE INSURANCE COMPANY, appellant.
• Court: New York Supreme Court — Appellate Division

99 A.D.3d 643

951 N.Y.S.2d 726

2012 N.Y. Slip Op. 06571

Raymond AZZATO, et al., respondents,

v.ALLSTATE INSURANCE COMPANY, appellant.

Supreme Court, Appellate Division, Second Department, New York.

Oct. 3, 2012.

Feldman, Rudy, Kirby & Farquharson, P.C., Jericho, N.Y. (Bruce N. Farquharson of counsel), for appellant.

Philip L. Curcio, Smithtown, N.Y., for respondents.

MARK C. DILLON, J.P., THOMAS A. DICKERSON, LEONARD B. AUSTIN, and ROBERT J. MILLER, JJ.

In an action to recover benefits under an insurance policy, the defendant appeals, as limited by its brief, from so much of an order of the Supreme Court, Suffolk County (Mayer, J.), dated September 6, 2011, as, upon reargument, in effect, vacated an order of the same court dated June 7, 2010, granting that branch of its motion which was for summary judgment dismissing the complaint, and thereupon denied that branch of the motion and the alternative branch of its motion which was, in effect, for partial summary judgment limiting the potential recovery of damages by the plaintiff Raymond Azzato.

ORDERED that the order dated September 6, 2011, is modified, on the law, (1) by deleting the provision thereof, upon reargument,in effect, vacating the determination in the order dated June 7, 2010, granting that branch of the defendant's motion which was for summary judgment dismissing the complaint insofar as asserted by the plaintiff Raymond Azzato, and thereupon denying that branch of the motion and the alternative branch of its motion which was, in effect, for partial summary judgment limiting the potential recovery of damages by the plaintiff Raymond Azzato, and substituting therefor a provision, upon reargument, adhering to the determination in the order dated June 7, 2010, granting that branch of the motion, and (2) by deleting the provision thereof, upon reargument, in effect, vacating the determination in the order dated June 7, 2010, granting that branch of the defendant's motion which was for summary judgment dismissing so much of the complaint insofar as asserted by the plaintiff Tricia Williamson as sought to recover damages under the provisions of the insurance policy for injury to a dwelling, and substituting therefor a provision, upon reargument, adhering to the determination in the order dated June 7, 2010, granting that branch of the motion; as so modified, the order dated September 6, 2011, is affirmed insofar as appealed from, without costs or disbursements.

The plaintiff Raymond Azzato and a nonparty, Richard Pleasants, purchased certain real property located in East Islip (hereinafter the subject property), which was improved with a residence (hereinafter the subject dwelling). Azzato and his wife, the plaintiff Tricia Williamson, secured from the defendant insurance carrier a landlord's package insurance policy (hereinafter the policy) covering the subject dwelling and, inter alia, certain personal property located in the subject dwelling. The policy did not name Pleasants as a co-insured. The policy stated that Azzato and Williamson were insured only to the extent that they possessed an insurable interest in the property.

The plaintiffs commenced this action to recover benefits under the policy after a fire occurred on the subject property. The plaintiffs sought to recover the sum of $250,000, alleging that the defendant improperly denied their claim.

The defendant moved, inter alia, for summary judgment dismissing the complaint. The defendant contended that it had properly denied the claim since Azzato had submitted fraudulent evidence purporting to establish the cost of certain appliances which were allegedly located in the subject dwelling at the time of the fire. The defendant contended that Azzato's fraud vitiated coverage, since his actions breached the concealment and fraud provision of the policy. The defendant argued, in the alternative, that Azzato's insurable interest was limited [99 A.D.3d 645]to 50% of the value of the subject dwelling, as he was only a 50% owner of that dwelling. The defendant also contended that it was entitled to summary judgment dismissing the complaint insofar as asserted by Williamson since she was not named on the deed to the subject property and, therefore, did not have any insurable interest.

In an order dated June 7, 2010, the Supreme Court, treating the motion as unopposed, granted that branch of the defendant's motion which was for summary judgment dismissing the complaint. Thereafter, the parties stipulated that the defendant's motion had been timely opposed by the plaintiffs, and the plaintiffs moved for leave to reargue their opposition to the defendant's motion. In the order appealed from, the Supreme Court granted reargument, in effect, vacated its prior order, and thereupon denied the defendant's motion in its entirety. The court, in effect, concluded that there were triable issues of fact as to whether Azzato breached the concealment and fraud provision of the insurance policy and whether any fraud perpetrated by Azzato could be imputed to Williams. In addition, the court determined, in effect, that there was a triable issue of fact as to whether the policy limited recovery to the extent of the plaintiffs' insurable interests, since the relevant policy provision was ambiguous. The defendant appeals, and we modify.

The concealment and fraud provision of the policy provided, inter alia, that the defendant “does not cover you or any other person insured under this policy who has concealed or misrepresented any material fact or circumstance, before or after a loss.” The defendant contends that Azzato breached this provision when he submitted a store receipt purporting to demonstrate the cost of the appliances allegedly damaged in the fire.

A concealment and fraud provision of an insurance policy “makes clear that the general rule of insurance law requiring good faith and fair dealing applies to fraudulent statements and false swearing made by an assured after a loss” ( Domagalski v. Springfield Fire & Mar. Ins. Co., 218 App.Div. 187, 189, 218 N.Y.S. 164). “This provision is breached if an insured tenders a fraudulent proof of loss as the basis for a recovery under the policy” ( Saks & Co. v. Continental Ins. Co., 23 N.Y.2d 161, 165, 295 N.Y.S.2d 668, 242 N.E.2d 833;see Kantor Silk Mills, Inc. v. Century Ins. Co., Ltd., 253 N.Y. 584, 171 N.E. 793).

“Courts have been assiduous to prevent the use of the clause to bar a recovery where the alleged fraud or false swearing was not intentional, or the false statements were matters of opinion honestly, although mistakenly, held by the assured” ( Domagalski v. Springfield Fire & Mar. Ins. Co., 218 App.Div. at 189, 218 N.Y.S. 164;see70A N.Y. Jur. 2d, Insurance § 2017). “On the other hand, [courts] have not hesitated to hold that a recovery would not be permitted if it clearly appeared that the assured had intentionally made false and fraudulent statements or intentionally sworn falsely” ( Domagalski v. Springfield Fire & Mar. Ins. Co., 218 App.Div. at 189, 218 N.Y.S. 164;see70A N.Y. Jur. 2d, Insurance § 2022 [2011] ).

Thus, a key issue in determining whether a concealment and fraud provision of an insurance policy has been breached is whether the inaccurate proof of loss was created or submitted with “a willful intent to defraud or to misrepresent the material facts” ( St. Irene Chrisovalantou Greek Orthodox Monastery v. Cigna Ins. Co., 226 A.D.2d 624, 624, 641 N.Y.S.2d 352;see Christophersen v. Allstate Ins. Co., 34 A.D.3d 515, 516, 824 N.Y.S.2d 171). One manner in which fraudulent intent may be established is through proof that the claimed value of the loss was grossly disproportionate to the actual value of the loss ( see Saks & Co. v. Continental Ins. Co., 23 N.Y.2d at 165, 295 N.Y.S.2d 668, 242 N.E.2d 833;see also70A N.Y. Jur. 2d, Insurance § 2022 [2011] ). Such an inference of fraudulent intent raised by proof that the insured's claimed losses were grossly overvalued “becomes conclusive where it is shown that the difference between the amounts claimed in the proof of loss and those actually proved to have been destroyed are grossly disparate and the explanation tendered is so unreasonable or fantastic that it is inescapable that fraud has occurred” ( Saks & Co. v. Continental Ins. Co., 23 N.Y.2d at 165–166, 295 N.Y.S.2d 668, 242 N.E.2d 833;see Pipo Bar & Rest., Inc. v. Certain Underwriters at Lloyd's at London, 15 A.D.3d 556, 556–557, 792 N.Y.S.2d 82).

Here, the defendant established its prima facie entitlement to judgment as a matter of law dismissing the complaint insofar as asserted by Azzato by demonstrating that Azzato breached the concealment and fraud provision of the policy when he submitted proof, in support of his claim, purporting to establish the cost of the appliances allegedly located in the subject dwelling at the time of the fire. The defendant established that the price values submitted by Azzato were significantly inflated from the actual price that he paid ( see Pogo Holding Corp. v. New York Prop. Ins. Underwriting Assn., 97 A.D.2d 503, 505, 467 N.Y.S.2d 872,affd.62 N.Y.2d 969, 479 N.Y.S.2d 336, 468 N.E.2d 291;Domagalski v. Springfield Fire & Mar. Ins. Co., 218 App.Div. at 189, 218 N.Y.S. 164).

In opposition, the plaintiffs failed to raise a triable issue of fact with respect to Azzato's breach of the concealment and fraud provision of the policy ( see Pipo Bar & Rest., Inc. v. Certain Underwriters at Lloyd's at London, 15 A.D.3d at 556–557, 792 N.Y.S.2d 82). The plaintiffs' contention that the proof Azzato submitted was only intended to be a post-loss estimate of the replacement value of the appliances is belied by the fact that the proof he submitted was made to look like an actual receipt provided to him by the store on the date that he originally purchased the appliances ( cf. Saks & Co. v. Continental Ins. Co., 23 N.Y.2d at 165–166, 295 N.Y.S.2d 668, 242 N.E.2d 833). Thus, the form, in addition to the content,...