N.Y. Federal Court Holds Misrepresentation Precludes Coverage Regardless of Cause of Loss

Recently, in Converse v. State Farm Fire and Casualty Company, a judge in the Northern District of New York held that a policyholder was not entitled to coverage for a fire due to misrepresentations made during the claim investigation.

In that case, the plaintiff had sent a letter to an acquaintance, offering to pay $5,000 if he would burn down her home and make it look like an electrical fire. The acquaintance refused the offer, but the house was still destroyed in a fire several weeks later. The plaintiff denied any involvement in the fire, which she alleged occurred when a lit cigarette was thrown in the trash.

During the carrier’s investigation, the plaintiff denied having ever asked anyone to burn down the house.  That misrepresentation ultimately formed part of the basis for the carrier’s denial of the claim.

In litigation, the plaintiff argued that the misrepresentation could not be considered “material” because the carrier already knew about the letter, and, as such, her statements did not affect the investigation.  The Court rejected this argument, holding that the carrier was entitled to ask questions about the letter, including the plaintiff’s purpose in writing it, her expectations, further communications, and the acquaintance’s response.  By denying knowledge of the letter, the Court found that the plaintiff acted in a way that could frustrate the investigation, which rendered the misrepresentation material.

The fact that the acquaintance ultimately did not go through with setting the fire was immaterial.  Rather, the relevant concern was whether the plaintiff had made willful misrepresentations during the investigation of the claim, regardless of the cause.

If you have any questions or would like additional information, please contact any member of HKR’s team.