Union Mutual Fire Insurance Company v 844 Knickerbocker, LLC, et al.
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Attorneys and Parties
Brief Summary
Insurance rescission based on material misrepresentations in commercial property insurance applications.
The Supreme Court, Nassau County, denied the insurer's motion for summary judgment on its declaratory judgment complaint and granted the cross-motion of 844 Knickerbocker, LLC and Sanjaya Mallick for summary judgment dismissing the complaint.
The Appellate Division reversed the order that denied the insurer summary judgment and that dismissed the insurer's complaint.
The insurer established as a matter of law that the insureds materially misrepresented the number of apartment units at the property by listing two units instead of three. Through an underwriter affidavit and underwriting guidelines, the insurer showed that it would not have issued the same policy and would have charged a higher premium if the correct information had been disclosed. The defendants failed to raise a triable issue of fact.
Background
In 2020 and 2021, Union Mutual Fire Insurance Company issued commercial insurance policies to 844 Knickerbocker, LLC and Sanjaya Mallick based on their applications. After Anibal Garcia brought a personal injury action against them in Kings County, the insurer investigated and determined that the insured property had three apartment units, not two as stated in the applications. The insurer rescinded the policies and brought this declaratory judgment action seeking a declaration that the policies were void ab initio and that it had no duty to defend or indemnify the insureds in the underlying Garcia action.
Lower Court Decision
The Supreme Court, Nassau County, held against the insurer by denying its motion for summary judgment on the complaint and granting the insured defendants' cross-motion for summary judgment dismissing the complaint.
Appellate Division Reversal
The Appellate Division, Second Department, reversed on the law, granted the insurer's motion for summary judgment, denied the insured defendants' cross-motion, and remitted the matter for entry of a judgment declaring that the policies are void ab initio and that the insurer has no obligation to defend or indemnify 844 Knickerbocker, LLC and Sanjaya Mallick in the underlying personal injury action.
Legal Significance
The decision reinforces that a New York insurer may rescind a policy for a material misrepresentation when it supports its position with competent underwriting proof, such as an underwriter affidavit and underwriting guidelines showing that the insurer would not have issued the same policy if the true facts had been disclosed. The ruling also confirms that, in a declaratory judgment action, the appellate court will remit for entry of a formal declaration after determining the parties' rights.
If an insured misstates a material property characteristic in an insurance application, and the insurer can prove through underwriting evidence that the truth would have changed the policy terms or premium, the insurer may void the policy from inception and avoid defense and indemnity obligations.