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Commercial Property |
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Material
Misrepresentations |
After a fire totally
destroyed its place of business, Precision Auto Accessories, Inc. (Precision)
sought recovery under its insurance policy with Utica First Insurance Company
(Utica). Utica investigated, denied coverage, rescinded the policy back to its inception
date, and refunded the entire annual premium based on allegedly material
misrepresentations Precision made on its application with respect to its claims
history. Precision brought this action, seeking a determination that it did not
willfully conceal or misrepresent material facts, and a declaration that Utica
was obligated to pay the loss. Utica moved for summary judgment based on
material misrepresentations on the application and a declaration that it owed
no coverage. Precision cross-moved for summary judgment demanded in its action.
The trial court denied both parties' cross motions for summary judgment and
both parties cross-appealed.
Contrary to Precision's
contention, Utica met the burden of proof that it was entitled to rescind the
policy by presenting various documents relating to its underwriting practices
for similar risks. These established that it would not have issued the policy
if it had known of Precision's actual previous loss history as opposed to that
provided in the application. Precision countered, contending that Utica's
motion should be denied because it did not establish that the representations
were willful. To support its cross motion, Precision contended that its motion
should be granted because Utica knew about the misrepresentations but decided
to treat the policy as in effect. In addition, Utica was estopped from denying
coverage because the errors in the application were due to the negligence of
Precision's insurance agent who prepared it and bound coverage.
The appellate court rejected
the latter contention and stated that Precision was bound to the contents of
the application because it signed it and there was an implicit duty that it
review the application and correct any errors. It also rejected Precision's
contention that Utica waived its right to rescind the policy because it knew of
Precision's misrepresentations concerning the loss history before the fire
occurred. In addition, it denied Precision's argument that Utica was estopped
from disclaiming coverage because of an eight-month delay in notifying
Precision, because Precision itself failed to cooperate by giving Utica
authorization to secure the previous carrier's loss records and was thus
unaware of the facts until shortly before the fire. Precision simply did not
demonstrate any prejudice based on Utica's alleged delay in disclaiming
coverage. While Precision contended that it was prejudiced because, without the
insurance proceeds, it could not pay its suppliers and remain in business, it
did not identify any triable issue of fact that it was prejudiced by the delay
with respect to its asserted grounds for rescission, being the purported
misrepresentations made in the application.
The appellate court
unanimously ordered that the order appealed from the trial court be modified
and judgment granted in favor of Utica and that it not be obligated to
indemnify Precision for the fire loss.
Supreme Court, Appellate
Division, Fourth Department, New York. Precision Auto Accessories, Inc.,
Plaintiff-Respondent-Appellant v. Utica First Insurance Company,
Defendant-Appellant-Respondent, et al., Defendants. June 6, 2008. 52 A.D.3d
1198, 859 N.Y.S.2d 799