Opinion
No. 090196/09.
07-17-2015
SS Medical Care, PC a/a/o Wilson Mercado–Cabrera, Plaintiff, v. USAA General Indemnity Company, Defendant.
The Rybak Firm, PLLC, Brooklyn, Counsel for plaintiff. NcDonnell & Adels, PC, Garden City, Counsel for defendant.
The Rybak Firm, PLLC, Brooklyn, Counsel for plaintiff.
NcDonnell & Adels, PC, Garden City, Counsel for defendant.
REGINALD A. BODDIE, J.
Introduction
Plaintiff commenced the instant case to recover first party no-fault benefits in the amount of $5,291.31 for medical services provided to its assignor as the result of an automobile accident that occurred on February 4, 2009. The parties stipulated that the bills and denials were timely and properly mailed, and that the sole issue for determination by the court is defendant's defense of material misrepresentation and fraudulent procurement of the underlying insurance policy.
Facts
At trial, plaintiff did not present any witnesses. Defendant presented April Lally, a litigation manager for USAA General Indemnity Company (USAA). Ms. Lally has been employed by USAA for 26 years and was trained to determine eligibility for military and other coverage issues. Her principal job duties include reviewing coverage and eligibility for litigation. She detailed the categories of eligibility, which included active service members, children of service members, national guard members, officer candidates, certain former service members, and their families. She also described the application process during which an application is completed on the USAA website and the company follows up with the mailing of an “integrity letter” to the applicant. The integrity letter seeks to confirm the information provided for purposes of eligibility prior to issuance of a policy.
Ms. Lally testified that the assignor made an online application for insurance in which he falsely represented that he was an active member of the Navy. She alleged and presented documents to establish that a subsequent search of the Department of Defense website affirmed that the assignor was not an active seaman. Defendant contends that because this representation constitutes a material misrepresentation and fraud, the assignor was properly denied first-party coverage, although coverage remained available to third parties and the policy was therefore not terminated or deemed void.
Defendant argued this action is consistent with the assignor's insurance policy, that was admitted into evidence and states the following:
Fraud
We do not provide coverage for any covered person, as defined in the policy, who has knowingly concealed or misrepresented any material fact or circumstance relating to this insurance:
1. At the time the application was made; or
2. At any time during the policy period; or
3. In connection with the presentation or settlement of a claim
However, we will provide coverage for such covered person for damages sustained by any person who has not made fraudulent statements or engaged in fraudulent conduct if such damages result from an accident which is otherwise covered under this policy.
On cross-examination, however, Ms. Lally conceded that she is not involved in the underwriting of policies and has no knowledge of the policies and procedures governing such underwriting.
Analysis and Conclusion
Insurance Law § 3105 governs material misrepresentation and fraudulent procurement of insurance contracts. Section 3105(a) provides: “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. A misrepresentation is a false representation, and the facts misrepresented are those facts which make the representation false.”
Here, Ms. Lally credibly testified and produced documents evidencing that the assignor misrepresented that he was an active member of the Navy on his application for automobile insurance. Although plaintiff sought to challenge defendant's sources of information, he failed to offer any evidence whatsoever to rebut this contention. Consequently, based on the evidence presented, the court finds the allegation of misrepresentation to be true. However, the inquiry does not end there.
It is well settled that to establish the right to rescind an insurance policy an insurer must show that the insured made a material misrepresentation when he or she secured the policy (Interboro Ins. Co. v. Fatmir, 89 AD3d 993 [2d Dept 2011], citing see Novick v. Middlesex Mut. Assur. Co., 84 AD3d 1330 [2011] ; Varshavskaya v. Metropolitan Life Ins. Co., 68 AD3d 855, 856 [2009] ; Schirmer v. Penkert, 41 AD3d 688, 690 [2007] ; Zilkha v. Mutual Life Ins. Co. of NY, 287 A.D.2d 713, 714 [2001] ). A misrepresentation is considered to be material only if the insurer would not have issued the policy had it known the facts misrepresented (Interboro, 89 A.D.2d at 994, citing see Insurance Law § 3105[b][1] ; Novick, 84 AD3d at 1330 ; Varshavskaya, 68 AD3d at 856 ). “To establish materiality as a matter of law, the insurer must present documentation concerning its underwriting practices, such as underwriting manuals, bulletins, or rules pertaining to similar risks, that show it would not have issued the same policy if the correct information had been disclosed in the application” (Interboro, 89 AD3d at 994, quoting Schirmer v. Penkert, 41 AD3d at 690–691 ).
Here, defendant established that plaintiff's assignor provided false information on the application. However, defendant failed to elicit at trial any testimony or produce any other evidence, including documentation concerning its underwriting policies, to establish that the policy would not have been issued if the correct information was known.
The reason for such failure to elicit this testimony seems apparent since Ms. Lally testified that she was neither qualified nor possessed sufficient knowledge to testify about underwriting issues. Nonetheless, absent such proof, defendant cannot meet its burden, as a matter of law, in establishing that the plaintiff's assignor's misrepresentations were material. Therefore, its defense of misrepresentation and fraudulent procurement cannot be sustained.
For the reasons stated, plaintiff is granted a judgment for the amount sought along with costs, statutory interest and attorney's fees.