Scott v. AIG Prop. Cas. Co.

• Citation: 417 F.Supp.3d 329
• Decision Date: 30 September 2019
• Docket Number: 1:17-cv-1052-GHW
• Parties: Phillip Michael SCOTT, Plaintiff, v. AIG PROPERTY CASUALTY COMPANY and Great Northern Insurance Company, Defendants.
• Court: United States District Courts. 2nd Circuit. United States District Courts. 2nd Circuit. Southern District of New York

417 F.Supp.3d 329

Phillip Michael SCOTT, Plaintiff,

v.AIG PROPERTY CASUALTY COMPANY and Great Northern Insurance Company, Defendants.

1:17-cv-1052-GHW

United States District Court, S.D. New York.

Signed September 30, 2019

Jason Marc Cieri, Alvarez, Carbonell, Feltman & Da Silva PL, Verne Alan Pedro, Merlin Law Group, New York, NY, for Plaintiff.

Dennis M. Wade, Michael A. Bono, Paul W. Vitale, Vivian S. Turetsky, Wade Clark Mulcahy LLP, Melissa F. Brill, Cozen O'Connor, New York, NY, Eric D. Freed, Pro Hac Vice, Cozen O'Connor, Philadelphia, PA, for Defendants.

MEMORANDUM OPINION AND ORDER

GREGORY H. WOODS, United States District Judge:

In the early morning of January 1, 2015, Plaintiff's home in Scarsdale, NY went up in flames. With it—Plaintiff claims—went the prototype of his "El Hydro" system, a device that uses hydrogen, extracted from water, to greatly increase the efficiency of internal combustion engines, and which was the subject of a recent $300 million contract. So too went over a million dollars of Plaintiff's personal property, which he says comprised—among other things—hundreds of thousands of dollars' of artwork (including "maybe a Picasso") and an extensive collection of precious stones.

When Defendants—who each issued a homeowner's insurance policy on Plaintiff's home just weeks before the fire occurred—investigated Plaintiff's claims, they found that Plaintiff had recently lost a protracted legal battle over the foreclosure of his home, had received a discharge in bankruptcy a mere thirteen months before the fire, and was largely unable to provide any corroboration for his claim that he was a wealthy entrepreneur with extensive personal property. Defendants denied Plaintiff coverage, citing both the provisions of their policies which prohibit "fraud and concealment" in the submission and investigation of a claim, as well as the provisions requiring that Plaintiff cooperate with the insurers' investigations. Plaintiff then filed this action, claiming that Defendants had breached their contracts by failing to pay his claim. Defendants moved for summary judgment on the ground that Plaintiff's coverage under the policies had been voided. For the reasons that follow, Defendants' motion for summary judgment is GRANTED.

I. BACKGROUND

The Court views the facts in the light most favorable to the non-moving party. See Johnson v. Killian , 680 F.3d 234, 236 (2d Cir. 2012). Unless otherwise indicated, the following facts are undisputed.¹

a. The Purchase and Foreclosure of 12 Inverness Road

This legal saga began innocuously in June 2005, when Plaintiff—along with two other buyers² —purchased a residence at 12 Inverness Road in Scarsdale, New York ("12 Inverness") for $725,000. Plaintiff's Responses to Defendants' Joint Statement of Material Facts, Dkt. No. 93 ("56.1 Stmt."), at ¶ 1. The sale was financed by a mortgage loan in the same amount, which was eventually assigned to The Bank of New York Trust Co., N.A. (the "Mortgagee Bank"). Id. at ¶ 12. The following year, on April 2, 2006, 12 Inverness was damaged by a fire determined to be electrical in origin.³ Id. at ¶ 63. Afterwards, Plaintiff embarked on a total renovation and rebuild of 12 Inverness, with the goal of converting it from a single-story ranch house into a two-story colonial. Id. at ¶ 64.

In April 2007, Plaintiff and his co-borrowers defaulted on the mortgage for 12 Inverness. Id. at ¶ 20; Declaration of Eric D. Freed, Dkt. No. 89 ("Freed Decl."), Ex. 9 at 14:17-24. Accordingly, the Mortgagee Bank initiated foreclosure proceedings in the Supreme Court of the State of New York, Westchester County in 2008 and obtained a judgment of foreclosure and sale on March 25, 2009.⁴ 56.1 Stmt. at ¶¶ 25-26.

Over the next several years, Plaintiff repeatedly attempted to vacate the judgment of foreclosure.⁵ Id. at ¶¶ 27-29. Those attempts culminated in an order issued on March 28, 2012, in which Judge Mary H. Smith of the Westchester County Supreme Court warned Plaintiff that any future motions seeking similar relief would be deemed frivolous and could warrant the imposition of sanctions. Id. at ¶ 29; Freed Decl., Ex. 77 at 3 ("The inescapable fact is that this mortgage has not been paid since May 1, 2007 ... [and] there simply exists no reason in law or equity for this action to not forthwith proceed to its logical conclusion.").

After Plaintiff engaged in several more unsuccessful attempts to forestall the foreclosure sale,⁶ the court scheduled a public auction of 12 Inverness for May 6, 2013. 56.1 Stmt. at ¶ 49. On May 3, 2013—three days before the auction—Plaintiff filed for Chapter 13 bankruptcy in the United States Bankruptcy Court for the Southern District of New York, for the explicit purpose of "get[ting] at the bank," "strip[ping] off" what he viewed as the "illegal" judgment in favor of the Mortgagee Bank, and staying the foreclosure proceedings. Id. at ¶¶ 50-51. After the sale of 12 Inverness was cancelled, Plaintiff withdrew his bankruptcy petition on May 6, 2013—the same day for which the auction had been scheduled. Id. at ¶ 51.

Shortly thereafter, in July 2013, a suspicious motion was filed in the Westchester County foreclosure action—purportedly by counsel for the Mortgagee Bank—which stated that the bank had voluntarily elected to discontinue the action. Id. at ¶¶ 34-35. However, soon after, the Mortgagee Bank attorney who supposedly filed this motion indicated in a sworn affirmation that the motion was "an unauthorized forgery," and that her signature and those of other employees at her firm had been "forged/traced/affixed to the Vacatur Motion from other documents filed in this and/or other related proceedings." Id. at ¶ 37. Before any substantive inquiry could be conducted as to the origins of this apparently fraudulent filing, Plaintiff filed a second bankruptcy petition pro se on August 22, 2013, which once again stayed the state court foreclosure proceedings. Id. at ¶¶ 38, 52, 185.

In filings related to this second bankruptcy petition, Plaintiff indicated that his monthly income was zero, that "no increase or decrease" of his income was expected, and that he was not in possession of any property that belonged to others. Id. at ¶¶ 189, 192-93. He provided a detailed list of his claimed $13,000 in personal property—which included $2,700 worth of clothing and $1,600 in tools and lawn equipment. Id. at ¶¶ 187, 188. Plaintiff's "Summary of Schedules" also ascribed a "current value" of $525,000 to 12 Inverness. Id. at ¶ 186. That $525,000 valuation corresponded with the figure provided in a detailed appraisal conducted by Mr. George Charles, the owner of Epidamy Appraisals, in September 2013, which revealed that the renovation of the home was still very much a work in progress.⁷ Id. at ¶¶ 148, 150-55. The appraiser noted in his September 2013 report that "[t]he entire property was incomplete except for one bedroom which was occupied by the owner," and later testified that although homes in the area typically started out at around $1 million, 12 Inverness was valued at half that amount because "it was frame and inside was just like two by fours" and "needed everything," with an estimated "cost to cure" of $880,000. Id. at ¶¶ 151-53. This assessment is corroborated by color photos attached to the appraisal. Id. at ¶¶ 154-55; Freed Decl., Ex. 60.⁸

On November 8, 2013, attorney Kim D'Souza entered an appearance on behalf of Plaintiff in the August 2013 bankruptcy action. 56.1 Stmt. at ¶¶ 53, 196. On December 8 and December 11, 2013, Mr. D'Souza filed new versions of several of the schedules that were originally filed by Plaintiff on August 22, 2013. Id. at ¶¶ 54, 196. Those schedules repeated virtually all the information that Plaintiff had included in his August 22, 2013 filing, including the representation that 12 Inverness had a current value of $525,000, that Plaintiff's personal property was worth a total of $13,000, that Plaintiff had zero income, and that Plaintiff was not in possession of any property belonging to others. Id. at ¶¶ 197-98. Based on Plaintiff's representations, the bankruptcy court granted Plaintiff a discharge on December 18, 2013. Id. at ¶ 55.

Mr. D'Souza's December 2013 filings also included a motion requesting that the Mortgagee Bank's lien on 12 Inverness be avoided. Id. at ¶¶ 56, 200. Plaintiff's motion to avoid the Mortgagee Bank's lien remained pending for almost a year, until the bankruptcy court issued a ruling on October 30, 2014. Id. at ¶¶ 57, 202; Freed Decl., Ex. 24. Finding that it lacked jurisdiction to provide the requested relief, the bankruptcy court denied Plaintiff's motion, thereby leaving the March 2009 judgment of foreclosure and sale undisturbed. 56.1 Stmt. at ¶¶ 57, 202; Freed Decl., Ex. 24.

b. Plaintiff's Acquisition of Two Homeowners Insurance Policies from Defendants

After the 2006 fire at 12 Inverness, Plaintiff's homeowner's insurance policy was cancelled and the property remained uninsured during the ensuing years until, in late 2014, Plaintiff obtained the two homeowner's insurance policies at issue in this action. 56.1 Stmt. at ¶ 88.

On October 30, 2014—the same day that the bankruptcy court denied Plaintiff's request to extinguish the Mortgagee Bank's lien on 12 Inverness—Plaintiff spoke to a representative of GEICO Insurance Agency ("GEICO") about obtaining insurance to cover 12 Inverness. Id. at ¶ 119. GEICO writes insurance through multiple carriers and acts as an agent for Defendant AIG Property Casualty Insurance Company ("AIG"), selling policies directly to customers using the AIG underwriting guidelines, platform, and rates. Id. GEICO determines coverage limits based on information provided by prospective customers. Id. at ¶ 121. Based on the information Plaintiff provided, GEICO calculated the replacement cost of 12 Inverness as $1.9 million. Id. at ¶ 122. After another conversation with Plaintiff, GEICO issued AIG policy #0016741768, which provided $2.5 million in coverage for Plaintif...