Did Carrier Properly Disclaim For Misrepresentation on Coverage Application?
In May 2013, Abdus S. Azad, the owner of real property located in Elmhurst, submitted an application to the Kingstone Insurance Company for a fire insurance policy for the property. In the application, Azad represented that the property was a two-family dwelling. Kingstone issued a fire insurance policy to Azad, which was renewed on an annual basis through July 2018.
On May 11, 2018, within the policy period, the property was damaged by a fire. The New York City Department of Buildings, which conducted an investigation, found that the property had been illegally converted to a seven-family dwelling with twenty-three occupants. Shortly thereafter, Azas submitted a notice of claim to Kingstone under the insurance policy. In June 2018, Kingstone disclaimed coverage for the damages caused by the fire and rescinded the insurance policy on the ground that Azad had made a material misrepresentation on his application concerning the use of the property by claiming it was a two-family dwelling.
Azad sued Kingstone to recover damages for breach of contract. Kingstone moved for summary judgment dismissing the complaint. Azad cross-moved to compel further discovery. Supreme Court granted Kingstone’s motion and, in effect, denied that branch of Azad’s cross-motion which was to compel further discovery. Azad appealed.
To establish its right to rescind an insurance policy, an insurer must demonstrate that the insured made a material misrepresentation. A misrepresentation is material if the insurer would not have issued the policy had it known the facts misrepresented. To establish materiality as a matter of law, an insurer must present clear and substantially uncontradicted documentation concerning its underwriting practice, such as underwriting manuals, bulletins, or rules pertaining to similar risks, which show that it would not have issued the same policy if the correct information had been disclosed in the application
Here, Kingstone established its prima facie entitlement to judgment as a matter of law dismissing the complaint by demonstrating that Azad made a misrepresentation on his application for insurance and that Kingstone would not have issued the insurance policy had it known the facts misrepresented. In support of its motion, Kingstone submitted Azad’s signed insurance application from 2013, which stated that the premises was a two-family dwelling. Kingstone also submitted evidence that the DOB issued violations to Azad because the premises had been converted to a multi-family dwelling. And Kingstone submitted its 2012 underwriting guide and an affidavit from its underwriting manager, which demonstrated that Kingstone would not have issued the policy if it had known the property was used as a multi-family dwelling. In opposition to Kingstone’s prima facie showing, Azad failed to raise a triable issue of fact.
And, contrary to Azad’s contention, Supreme Court properly denied that branch of his cross-motion which was to compel further discovery, as he failed to demonstrate that additional discovery might lead to relevant evidence or that facts essential to justify opposition to Kingstone’s motion for summary judgment were exclusively within the knowledge and control of Kingstone.