« Back to BG&S in the News

A PRIMER FOR THE FIRST-PARTY PROPERTY DAMAGE COVERAGE
By: RICHARD C. AITKEN, ESQ

FOR THE DEFENSE


A PRIMER FOR THE FIRST-PARTY PROPERTY DAMAGE COVERAGE


BY: RICHARD C. AITKEN, ESQ.
BRUNO, GERBINO & SORIANO, LLP
MELVILLE, NEW YORK


A recent lawsuit litigated in Supreme Court, New York County, illustrates the current status of the law with regard to first-party property damage claims.

In Luis A. Diaz v. Allstate Insurance Company, Supreme Court, New York County, index number 600598/03, the plaintiff, Luis A. Diaz, filed a claim with his insurance carrier, Allstate Insurance Company, claiming that his 2000 Ford Expedition which was leased was stolen on January 19, 2002, at 12:30 a.m., while it was parked in front of his ex-wife’s residence. When he returned to his vehicle at approximately 1:00 or 1:30 that afternoon the vehicle was no longer parked where he had parked it.

Subsequent thereto Mr. Diaz filed a theft claim with his insurance carrier, Allstate Insurance Company. Allstate reviewed the claim and determined that there was a need for further investigation by its Special Investigative Unit. Allstate’s investigation determined that when the lease agreement was entered into by the plaintiff, he was entitled to 12,000 miles per year on the lease for a total of 48,000 miles at the end of the four year lease term. At the time of the reported theft, (approximately two (2) years subsequent to the lease inception), Mr. Diaz had approximately 37,000 miles on the vehicle. Additionally, it was determined that Mr. Diaz was two (2) to three (3) months behind in his lease payments.

During the course of Allstate’s initial investigation into this matter, the plaintiff, Luis A. Diaz, advised Allstate that he was in possession of both keys to the vehicle and would be able to produce them to Allstate. He only forwarded a single key.

During the course of the investigation, Allstate determined that it would be necessary to conduct an Examination Under Oath pursuant to the policy of insurance in order to ascertain the plaintiff’s financial condition, the physical condition to the Ford Expedition and the whereabouts of the second key to the subject vehicle.

It is well-settled that an insured’s failure to comply with the provisions of an insurance policy requiring the insured to appear at an Examination Under Oath, subscribe their name to same, and to provide relevant information and documents is a material breach of the policy of insurance which precluded recovery of the policy proceeds. See, Johnson v. Allstate Insurance Company, 602 N.Y.S.2d 876, 197 A.D.2d 672 (2d Dep’t 1993); Argento v. Aetna Casualty Insurance Company, 184 A.D.2d 487, 584 N.Y.S.2d 607 (1st Dep’t 1992); and Pizzirusso v. Allstate Insurance Company, 143 A.D.2d 340, 532 N.Y.S.2d 309 (2d Dep’t 1988).

Additionally, where indicia of fraud are present, an insurer is entitled to obtain personal financial information of an insured, including tax returns and bank statements, to determine whether or not the insured had a financial motive to have feign the loss in question and/or submit a fraudulent insurance claim. See, Johnson v. Allstate Insurance Company, 602 N.Y.S.2d 876, 197 A.D.2d 672 (2d Dep’t 1993); and Ausch v. St. Paul Fire and Marine Insurance Company, 125 A.D.2d 43, 511 N.Y.S.2d 919 (2d Dep’t 1987).


During the course of the Examination Under Oath which took place several months after the insured’s initial recorded statement, Allstate’s counsel inquired as to Mr. Diaz’ financial condition and the physical condition of the insured’s 2000 Ford Expedition. During the course of the Examination Under Oath, Mr. Diaz admitted to Allstate’s counsel that he was approximately two (2) months behind in his lease payments when the vehicle was reported stolen. Additionally, Mr. Diaz gave testimony which indicated that based upon his income that he reported that he could not continue to afford the lease payments for the subject vehicle in addition to his daily living expenses.

At the time of the Examination Under Oath, Mr. Diaz was confronted with the fact that he only produced to Allstate one (1) of the two (2) keys he originally advised Allstate that he had in his possession. Mr. Diaz advised Allstate for the first time that a couple of months prior to the reported theft, he installed a remote starter in the Ford Expedition which required the use of one (1) of the keys to circumvent the transponder security system of the Ford Expedition. He further testified at the Examination Under Oath that the key installed with the remote starter system was a spare key and the key he submitted to Allstate was the key he used on a daily basis from the time he first obtained the vehicle.

The issue with the key and the remote starter system played a significant role at the time of trial as the key which he did submit to Allstate was analyzed by a forensic engineer who opined the key which Mr. Diaz had submitted to Allstate was essentially a brand new key and did not show any indication as to ever being used for the subject vehicle.

Ultimately, based upon its investigation and the engineer’s report, Allstate denied Mr. Diaz’ claim advising him that Allstate’s investigation determined that the alleged loss by theft did not take place in the manner alleged by Mr. Diaz and that Mr. Diaz made certain false or fraudulent statements and/or material misrepresentations to Allstate Insurance Company regarding the alleged loss by theft.

A lawsuit ensued and after discovery was completed, the trial took place before Justice Diane Lebedoff in Supreme Court, New York County, over the course of several days.

After the parties stipulated to the actual cash value of the vehicle, the only individual who testified on behalf of the plaintiff was Mr. Diaz himself. Mr. Diaz testified in accordance with his prior recorded statement and Examination Under Oath testimony with regard to the facts and circumstances surrounding the purported theft. More specifically, he testified that on the date in question, he went to visit his ex-wife, parked the vehicle at approximately 12:30 a.m., locked it, set the alarm and went inside for the evening. The following afternoon he returned for his vehicle and discovered it missing. He therefore filed a police report and notified his Allstate agent of the reported theft.


In contradiction to his Examination Under Oath testimony, he testified at trial that when he had the remote starter installed, a couple of months prior to the reported theft, the key which he installed with the remote starter to bypass the security system was, in fact, the key he used on a daily basis. He also testified at the time of trial that at or about the time he installed the remote starter on the vehicle, he stopped using the Ford Expedition on a daily basis as he acquired a 1992 Ford Taurus.

As an Examination Under Oath transcript is admissible into evidence at the time of trial (See, Kamenov v. Northern Ins. Co. of America, 259 A.D.2d 958 687 N.Y.S. 2d 838 (4th Dep’t 1999) and Examinations Under Oath are admissible as statements of the party and as extrajudicial admissions of the party. Dlugosz v. Exchange Mutual Ins. Co. 176 A.D.2d 1011, 574 N.Y.S. 2d 864 (3rd Dep’t 1991) Mr. Diaz’ Examination Under Oath transcript was used at the time of trial to impeach him.

During cross examination, it was shown that during the course of Allstate’s investigation, Mr. Diaz changed his testimony on at least three (3) different occasions with regard to the number of keys he had for the vehicle. As indicated hereinabove he initially advised Allstate that he had both sets of keys for the subject vehicle and would be able to produce them to Allstate. Several months thereafter at the Examination Under Oath conducted by Allstate’s counsel, he admitted to only returning one (1) key to Allstate advising that the other key was used for the remote starter system. Mr. Diaz did indicate at the Examination Under Oath, however, that the key he returned to Allstate was the key he used on a daily basis. During the course of the litigation, at the time of the Examination Before Trial as well as at the time of trial, he testified that he had made a "mistake" and the key which was used for the remote starter system was his everyday key and the key he returned to Allstate was his spare key.

After the plaintiff rested his case, the Allstate investigator testified with regard to the investigation conducted by Allstate. The investigation determined several key factors in which became the basis for Allstate’s denial of claim. These factors included the financial distress of the plaintiff which formed the basis of a financial motive to have feigned the loss; the high mileage on the leased vehicle which according to Allstate’s calculations would have meant that at the end of the lease term, the insured would have been approximately 20,000 miles over the amount permitted in the lease, which would have resulted in approximately $3,000.00 in penalties; the fact that Mr. Diaz made misrepresentations with regard to the keys he was in possession of at the time of the theft; and that the Engineer Allstate retained to inspect the keys submitted by Mr. Diaz determined that it was virtually a brand new key led Allstate to deny the claim.

The investigator further found it of great importance that although Mr. Diaz was able to submit to Allstate all receipts concerning the lease payments and was able to provide either receipt or authorization to obtain receipts with regard to repairs done to the vehicle from the leases inception to the time of the reported theft Mr. Diaz was unable to produce a scintilla of evidence that the remote starter which allegedly was installed in the vehicle with his second key was ever purchased or installed on the vehicle.

Ultimately, the interrogatory presented to the jurors at the time of trial was “Do you find by a fair preponderance of the evidence that plaintiff’s Ford Expedition was stolen?” After approximately two and a half hours (2 ½ ) of deliberation, the jury returned a verdict in favor of Allstate with a five - sixths (5/6) years verdict.

Interestingly in speaking with the jurors subsequent to the verdict, counsel was advised that the jurors were not concerned with the financial condition of the plaintiff or with the fact that there was high mileage on the vehicle. A juror advised that most of the jurors, themselves, or someone they knew were living essentially paycheck to paycheck. Moreover, they were of the belief that all people who lease vehicles are typically over the mileage. The single piece of evidence or lack of evidence which persuaded the jury to render a verdict in favor of Allstate was the fact that the plaintiff did not have any evidence to indicate that the remote starter system was actually physically installed in the vehicle which would have confirmed the plaintiff’s testimony concerning the whereabouts of the second key to the vehicle.

« Back to BG&S in the News