JSI Expert Serv. v Liberty Mut. Ins. Co.
Annotate this CaseDecided on March 23, 2005
Civil Court, Kings County
JSI Expert Service, a/a/o James Percine and Antoine Wekson, Plaintiff,
against
Liberty Mutual Ins. Co., Defendant.
046401/04
Loren Baily-Schiffman, J.
This action for first-party No-Fault benefits was tried to completion on February 8, 2005. Plaintiff seeks payment of claims for $708 for services to James Percine and $1600.50 for services provided to Antoine Wekson. Defendant denied plaintiff's claims on the basis that "[w]e do not provide coverage for any 'insured' who has made fraudulent statements or engaged in fraudulent conduct in connection with any accident or loss for which coverage is sought under this policy." At the start of trial, the parties stipulated that Plaintiff's bills had been timely submitted and that Defendant's denial would be admitted into evidence along with a number of exhibits. Plaintiff then made several motions in limine.
Plaintiff first sought the exclusion from evidence of transcripts of Examinations Under Oath (hereinafter "EUO") of Plaintiff's assignors. The Court granted this motion on the basis that the transcripts had not been signed by the assignors and that such documents would be hearsay.[FN1] Plaintiff also sought a determination by the Court that subpoenas for testimony of the assignors are defective and, accordingly, no adverse inference can be drawn from the non-appearance of the assignors at trial. The Court granted this application on the basis that the subpoenas had not been properly served.
The trial then proceeded on defendant's affirmative defense of fraud. Defendant called Philip Tirone as its only witness. Mr. Tirone is employed by defendant as an investigator in its Special Investigation Unit. He was assigned to investigate the subject claims. Mr. Tirone testified that the assignors allegedly sought treatment from plaintiff as a result of an accident [*2]between two cars. There were several passengers in the cars, including the assignors involved in this action. As part of his investigation, Mr. Tirone attempted to contact his insured, Ms. Paul, and assignor Wekson who gave the same home address as Ms. Paul. He was not able to reach either Ms. Paul or Mr. Wekson. He contacted assignor Percine, but testified that he got no helpful information from Mr. Percine. Mr. Tirone then recommended to defendant's attorney that EUOs be scheduled of Ms. Paul, Mr. Wekson and the other passengers. After more than one attempt to obtain appearances at EUOs, Mr. Wekson, Mr. Percine and Ms. Jerome appeared for EUOs with their attorneys and their testimony was taken. Mr. Tirone testified that other than his unsuccessful attempts to obtain signatures of the witnesses to their EUO transcripts, no further efforts were made to investigate the subject claims.
The Court ruled that the EUO transcripts were not admissible but Mr. Tirone could testify to his recollection of the testimony of the witnesses at their examinations. The basis of the Court's ruling was that the assignors and the Plaintiff/assignee were united in interest and, therefore, statements made by the assignors are binding on the assignee as admissions.
Mr. Tirone continued his testimony as to the statements made by Mr. Wekson and Mr. Percine at their EUOs and the conclusions he drew from this testimony which resulted in the denial of these claims on the basis of fraud. The testimony that Mr. Tirone says supports his conclusion that the accident in question was staged are as follows:
The two witnesses testified differently concerning the order in which the passengers in their car were picked up and dropped off by the driver;
Mr. Percine delayed his medical treatment until two (2) weeks after the accident and that Mr. Wekson referred him to the provider;
Mr. Wekson sought treatment from a different provider than he had been treated by for injuries from a prior accident;
The provider from which Mr. Wekser sought treatment was not located near his work or his home.
According to the arguments of counsel, other factors that contributed to Mr. Tirone's recommendation that the claims be denied on the basis of fraud are:
that the driver of the second car appears to have been "selected"; (No basis for this conclusion was presented at trial)
that the witnesses would not sign their EUO transcripts;
that the passengers in the first car refused to give statements to the investigator;
that the witnesses' statements at EUO seemed to follow a script;
that the driver of the second car was a woman.
At the close of the trial, the Court invited counsel to present legal memoranda on the standard of proof applicable to defendant's fraud defense and any other legal issues that had been presented in the trial. Defendant submitted a memorandum on the burden of proof issue. [*3]Plaintiff presented a memorandum arguing that Mr. Tirone should not have been permitted to testify to statements made by the assignors at their EUOs as such statements are hearsay and on the standard of proof issue.
STANDARD OF PROOF APPLICABLE TO FRAUD
In New York, proof of fraud must be made by clear and convincing evidence. Rudman v. Cowles Communications, 30 NY2d 1 (1972). Although defendant argued at trial that in a No-Fault case fraud need only be proven by a preponderance of the evidence, no cases could be found to support this position. In a second submission to the Court, dated March 19, 2005, defendant presented a copy of Hon. Jack Battaglia's decision in AB Medical Services, PLLC v. State Farm Mut. Auto Ins., 2005 NY Slip Op 25089 (Civil Court, Kings Co.) and argued that it supports defendant's position that the defense of "staged accident" in a No-Fault case only be proven by a preponderance of the evidence and not by clear and convincing evidence. To the extent that Judge Battaglia's decision finds that the defense of staged accident need only be proven by a preponderance of the evidence, this Court respectfully disagrees with Judge Battaglia. This Court holds that the insurer's defense of fraud, whether it be a staged accident or other fraud, requires proof by clear and convincing evidence.
ARE ASSIGNEES' STATEMENTS MADE AT EXAMINATIONS UNDER OATH ADMISSIBLE AS ADMISSIONS AS AGAINST THE ASSIGNEE/PLAINTIFF?
At trial, the Court permitted defendant's witness to testify to statements made by the assignors at their Examinations Under Oath on the theory that these statements are admissions by persons united in interest with the plaintiff/assignee. Plaintiff objected at trial that this testimony is hearsay. In its Post Trial Memorandum, plaintiff again argues that its objection at trial should have been sustained. Plaintiff cites to Richardson on Evidence, Farrell 11th ed. (hereinafter "Richardson"), §§8-239 and 8-241 for the "New York doctrine" which states the following:
In New York declarations of a vendor or assignor of a chattel or chose in action, whether made before or after the transfer, are inadmissible to affect the claim or title of a subsequent transferee for value.
Richardson, §8-242.
This rule stems from the decision in Paige v. Cagwin, 7 Hill (NY)361 (Sup Ct 1843) (action on a promissory note) and has been followed in Wangner v. Grimm, 169 NY 421 (1902) (action on a promissory note); Kelly v. Beers, 194 NY 60 (1909) (gift of savings bank account); Merkle v. Beidleman, 165 NY 21 (1900) (mortgage foreclosure). Except where the statements were made by the real party in interest, such as a decedent, and are offered against a person who claims through representation, such as the executor of that decedent, the New York doctrine will apply and the statements of the former owner, vendor or assignor will not be admissible to affect [*4]the claim of the subsequent owner or assignee.
Pursuant to the New York doctrine, the Court erred in permitting defendant's witness, Mr. Tirone, to testify to the statements of the assignees, Mr. Wekson and Mr. Percine at their EUOs. The Court should have sustained plaintiff's objections to this testimony. The Court now reverses that ruling and strikes from the record so much of the testimony of Mr. Tirone as concerned the statements of Mr. Wekson and Mr. Percine at their EUOs. With that testimony stricken from the record, the conclusion Mr. Tirone reached, that the accident was staged, is without substantial basis in the record and will not be credited by the Court.
TESTIMONY OF DEFENDANT'S WITNESS
It must be noted that even if all of the evidence of defendant's witness is credited, defendant has not met its burden of establishing by clear and convincing evidence that the accident in question was staged. Mr. Tirone relied on minor inconsistencies in the testimony of passengers in his insured's car; the statement that Mr. Percine did not seek medical assistance until two (2) weeks after the accident and then went to a provider referred by Mr. Wekson; that Mr. Wekson sought treatment from a different provider than had treated him for injuries in a prior accident; and that Mr. Wekson obtained treatment from a provider not near his home or work, in concluding that the accident was staged. Each of these facts is capable of a motivation other than that of fraud and together they do not establish clear and convincing proof that the accident in question was staged.
Mr. Tirone testified as to his training and experience in the field of insurance investigation, although there was no request that he be treated as an expert witness. An insurer's "founded belief" that an accident was staged cannot be based upon "unsubstantiated hypotheses and supposition". AB Medical Services PLLC v. Eagle Ins. Co., 3 Misc 3d 8 at 9 (App. Term 2nd & 11th Jud. Dists., 2003). However, what experience or training led Mr. Tirone to his conclusions based upon the facts adduced in his investigation is missing from the record. The Court is left to wonder why the fact that an assignor sought medical treatment in a neighborhood different from his home or work is significant. Similarly, the significance of the other car being driven by a woman is not provided by Mr. Tirone's testimony, yet he relies on this as a basis for finding that the accident was staged. While Mr. Tirone's trained opinion is entitled to some weight, Travelers Indemnity Co. v. Morales, 188 AD2d 350, 351 (1st Dept 1992), here there is no testimony in the record relating Mr. Tirone's training and experience to the conclusions he reached based upon the facts of this case. Accordingly, even had the Court not stricken any of Mr. Tirone's testimony from the record, the determination would be the same that defendant has failed to meet its burden to prove fraud by clear and convincing evidence.
CONCLUSION
For all the foregoing reasons, the Court finds that defendant has failed to meet its burden [*5]at trial to prove its defense of fraud by clear and convincing evidence. Accordingly, judgment is granted to plaintiff for $708 on Mr. Percine's claim and $1600.50 on Mr. Wekson's claims. In addition, plaintiff is granted statutory attorneys fees, interest and costs to be computed by the Clerk of the Court.
This constitutes the Decision and Order of the Court.
Exhibits may be retrieved in Chambers, Room 705.
Dated:March 23, 2005
_______________________
LOREN BAILY-SCHIFFMAN
J.C.C.
Footnotes
Footnote 1:Notwithstanding the decision of my colleague in PSG Psychological, PC v. State Farm Ins. Co., 2004 WL 2997955, this Court is of the opinion that EUO transcripts are not governed by CPLR §3116 as they are taken prior to the commencement of litigation and are not part of the Article 31 disclosure process.
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