Joseph v. Interboro Ins. Co.

• Citation: 42 N.Y.S.3d 316,144 A.D.3d 1105,2016 N.Y. Slip Op. 08050
• Parties: Romil JOSEPH, et al., appellants, v. INTERBORO INSURANCE COMPANY, et al., respondents, et al., defendants. (and a third-party action).
• Decision Date: 30 November 2016
• Court: New York Supreme Court — Appellate Division

144 A.D.3d 1105

42 N.Y.S.3d 316

2016 N.Y. Slip Op. 08050

Romil JOSEPH, et al., appellants,

v. INTERBORO INSURANCE COMPANY, et al., respondents, et al., defendants.(and a third-party action).

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

Nov. 30, 2016.

James M. Haddad, New York, N.Y., for appellants.

Picciano & Scahill, P.C., Westbury, N.Y. (Francis J. Scahill and Andrea E. Ferrucci of counsel), for respondent Interboro Insurance Company.

Wilson Elser Moskowitz Edelman & Dicker LLP, New York, N.Y. (Joseph L. Francoeur and Sheryl T. Parker of counsel), for respondent Karis & Karis, Inc.

REINALDO E. RIVERA, J.P., SHERI S. ROMAN, JEFFREY A. COHEN, and ROBERT J. MILLER, JJ.

In an action, inter alia, to recover damages for breach of contract and negligence, the plaintiffs appeal from an order of the Supreme Court, Kings County (Dabiri, J.), dated July 9, 2014, which granted the separate motions of the defendants Interboro Insurance Company and Karis & Karis, Inc., for summary judgment dismissing the complaint insofar as asserted against each of them and denied their cross motion, inter alia, to strike the pleadings of those defendants.

ORDERED that the order is affirmed, with one bill of costs.

The plaintiffs are the owners of residential property located in Brooklyn. Prior to purchasing the premises, the plaintiffs' mortgage broker, Raymond McKayle of NRF Funding Corp., informed them that they needed insurance in order to close. Thereafter, McKayle, on the plaintiffs' behalf, contacted an insurance broker, Chris Karis, of the defendant Karis & Karis, Inc. (hereinafter Karis & Karis), to procure a homeowners' insurance policy based upon representations the plaintiffs made in their loan application that they would occupy the premises as their primary residence. 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. The plaintiffs then commenced this action, inter alia, to recover damages for breach of contract and negligence. The Supreme Court granted the separate motions of Interboro and Karis & Karis for summary judgment dismissing the complaint insofar as asserted against each of them and denied the plaintiffs' cross motion, inter alia, for summary judgment on the complaint insofar as asserted against those defendants. The plaintiffs appeal.

The Supreme Court properly granted Interboro's motion for summary judgment dismissing the complaint insofar as asserted against it. “To establish the right to rescind an insurance policy, an insurer must show that its insured made a material misrepresentation of fact when he or she secured the policy” (Interboro Ins. Co. v. Fatmir, 89 A.D.3d 993, 993–994, 933 N.Y.S.2d 343 ; see Novick v. Middlesex Mut. Assur. Co., 84 A.D.3d 1330, 1330, 924 N.Y.S.2d 296 ; Varshavskaya v. Metropolitan Life Ins. Co., 68 A.D.3d 855, 856, 890 N.Y.S.2d 643 ; Zilkha v. Mutual Life Ins. Co. of N.Y., 287 A.D.2d 713, 714, 732 N.Y.S.2d 51 ). “A representation is a statement as to past or present fact, made to the insurer by, or by the authority of, the applicant for insurance or the prospective insured, at or before the making of the insurance contract as an inducement to the making thereof” (Insurance Law § 3105[a] ; see Morales v. Castlepoint Ins. Co., 125 A.D.3d 947, 948, 4 N.Y.S.3d 297 ). “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 A.D.3d at 994, 933 N.Y.S.2d 343 ; see Insurance Law § 3105[b] ; Novick v. Middlesex Mut. Assur. Co., 84 A.D.3d at 1330, 924 N.Y.S.2d 296 ; Varshavskaya v. Metropolitan Life Ins. Co., 68 A.D.3d at 856, 890 N.Y.S.2d 643 ). 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 (see Interboro Ins. Co. v. Fatmir, 89 A.D.3d at 994, 933 N.Y.S.2d 343 ; Schirmer v. Penkert, 41 A.D.3d 688, 690–691, 840 N.Y.S.2d 796 ).

Here, Interboro established its prima facie entitlement to judgment as a matter of law by submitting evidence demonstrating that the plaintiffs' application for insurance contained a misrepresentation regarding whether the premises would be owner occupied and that it would not have issued the subject policy if the application had disclosed that the subject premises would not be owner occupied (see Morales v. Castlepoint Ins. Co., 125 A.D.3d at 948, 4 N.Y.S.3d 297 ; James v. Tower Ins. Co. of N.Y., 112 A.D.3d 786, 787, 977 N.Y.S.2d 345 ; Interboro Ins. Co. v. Fatmir, 89 A.D.3d at 993–994, 933 N.Y.S.2d 343 ).

In opposition, the plaintiffs failed to raise a triable issue of fact. The plaintiffs admit that, at the time the application was completed, they did not intend to occupy the premises. Thus, contrary to the plaintiffs' contentions, although the application was completed prior to closing and prior to the inception of the policy, the representation therein that the premises was an owner-occupied primary residence established, in effect, a material misrepresentation of a then existing fact that the premises would be owner occupied, which was sufficient for rescission under Insurance Law § 3105 (see Morales v. Castlepoint Ins. Co., 125 A.D.3d at 948, 4 N.Y.S.3d 297 ; see also Brown v. Lockwood, 76 A.D.2d 721, 432 N.Y.S.2d 186 ).

Contrary to the plaintiffs' contentions, secondary evidence of the application for insurance which was signed by the plaintiffs in December 2009 constituted proof in admissible form (see Schozer v. William Penn Life Ins. Co. of N.Y., 84 N.Y.2d 639, 620 N.Y.S.2d 797, 644 N.E.2d 1353 ; see also CPLR 4539[b] ). Moreover, the plaintiffs' contention that the unsigned application dated March 16, 2010, did not constitute admissible proof lacks merit.

While an answer to an ambiguous question on an insurance application cannot be the basis for a claim of misrepresentation (see Bleecker St. Health & Beauty Aids, Inc. v. Granite State Ins. Co., 38 A.D.3d 231, 232, 834 N.Y.S.2d 1 ; Fanger v. Manhattan Life Ins. Co. of N.Y., 273 A.D.2d 438, 439, 709 N.Y.S.2d 622 ; Garcia v. American Gen. Life Ins. Co. of N.Y., 264 A.D.2d 808, 809, 695 N.Y.S.2d 420 ; Nadel v. Manhattan Life Ins. Co., 211 A.D.2d 900, 901, 621 N.Y.S.2d 180 ), here, the question was not ambiguous. In any event, as the plaintiffs admitted that they did not read the application when they signed it, they could not have been misled by any unclear language (see Bleecker St. Health & Beauty Aids, Inc. v. Granite State Ins. Co., 38 A.D.3d at 232, 834 N.Y.S.2d 1 ).

The plaintiffs' contention that Interboro was required to establish that the plaintiffs' misrepresentation was willful also lacks merit. With limited exception, a material misrepresentation, even if innocent or unintentional, is sufficient to warrant rescission of an insurance policy (see Smith v. Guardian Life Ins. Co., 116 A.D.3d 1031, 1032, 984 N.Y.S.2d 597 ; Security Mut. Ins. Co. v. Perkins, 86 A.D.3d 702, 703, 927 N.Y.S.2d 189 ; McLaughlin v. Nationwide Mut. Fire Ins. Co., 8 A.D.3d 739, 740, ...