Fraud in the Procurement, Part 2

The Appellate Division, 4th Department has issued a decision today that is relevant to my post last week regarding the defense of fraudulent procurement.

At the end of that post, I noted that "procurement is fraudulent where there are material misrepresentations and, had the carrier had known the truth, the policy would not have otherwise been issued." I failed to give a citation for this proposition, but the 4th Department has given me a fresh case to cite to.

In Rafi v Rutgers Cas. Ins. Co., the Court holds that "in order to prevail on its affirmative defense, defendant was required to submit proof concerning its underwriting practices with respect to applicants with similar circumstances in order to meet its burden of establishing that it would not have issued the same policy had the correct information been included in the application." 2009 NYSlipOp 00905 (4th Dep't, 2009) (internal quotation marks omitted).

Do note, though, that Rafi does not appear to concern an automobile insurance policy. As such, the reference in that decision to the policy being "void ab initio" due to material misrepresentation is inapplicable to no-fault (and other automobile insurance) litigation. That said, the definition provided in Rafi of what qualifies as a material misrepresentation made in the procurement of the policy should still apply to auto policies.

Where the misrepresentation concerns the insured's state of residence, as is typical allegation in no-fault litigation, this is presumably a simple burden for the carrier to meet. That is, where the insured lives in Queens, but procures an automobile insurance policy with the carrier by falsely stating that she lives in Pennsylvania, the carrier should easily be able to produce an affidavit from underwriting stating that the carrier would never have issued a Pennsylvania policy (which has its own set of specific provisions that comply with PA law) to a New York resident. Instead, the affidavit would presumably allege, had the carrier known the truth, the carrier would have either issued a different policy (that complied with New York law) or no policy at all.