Metropolitan Cas. Ins. Co. v Shaid

[*1] Metropolitan Cas. Ins. Co. v Shaid 2009 NY Slip Op 51038(U) [23 Misc 3d 1131(A)] Decided on May 21, 2009 Supreme Court, Queens County Siegal, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on May 21, 2009
Supreme Court, Queens County

Metropolitan Casualty Insurance Company, Plaintiff,

against

Noor Shaid, Ali Arshad, Roya Marvisi and Justin Marvisi, an Infant by His Parent and Natural Guardian, Roya Marvisi, Defendants.



6755/08

Bernice D. Siegal, J.

Upon the foregoing papers, plaintiff Metropolitan Casualty Insurance Company ("Metropolitan"), moves for an order pursuant to CPLR 3212 granting summary judgment against defendants , Noor Shaid ("Shaid") and Ali Arshad ("Arshad") and for the entry of a default judgment pursuant to CPLR 3215 against the defendants, Roya Marvisi ("Marvisi") and Justin Marvisi, by his parents and natural guardian, Roya Marvisi.

Plaintiff, Metropolitan, an automobile liability insurer, seeks a declaratory judgment declaring that Shaid and Arshad breached the cooperation clause in the Insurance Contract. In the underlying action, pending in this court, plaintiffs therein allege that a motor vehicle accident occurred on June 8, 2006 when a vehicle operated by the underlying plaintiff Justin Marvisi came into contact with the vehicle insured by Metropolitan operated by Arshad and owned by Shaid.

Metropolitan alleges that defendants Shaid and Arshad submitted false versions of the accident and the facts and circumstances surrounding the possession, operation and use of the insured vehicle by Arshad, which breached the cooperation condition of Shaid's Contract of Automobile Insurance ("Contract") by their submission of recorded statements to a representative of Metropolitan.

Metropolitan alleges that Shaid, in 2006, advised Metropolitan that he did not know the identity of the person who was driving his vehicle at the time of the accident and that he had dropped off his vehicle at a service station with the keys inside the vehicle. Thereafter, Metropolitan contends that in 2008, Shaid acknowledged [*2]that he knew Arshad, the driver, and had given him permission to use the vehicle for personal and non business related reasons.

Metropolitan asserts that by reason of these allegedly false submissions, Arshad and Shaid have knowingly and willfully breached the cooperation condition of the Contract as a matter of law. As a consequence of their allegedly false submissions, Metropolitan issued a disclaimer notice in October of 2006 based on a specific exclusion in the Contract dealing with use of the insured auto in an "auto business." Metropolitan further contends that the original allegedly false statements have now prejudiced its ability to defend the action and even if the default judgment had not been entered, Shaid and Arshad have still breached the cooperation condition of the Contract.

The law is well settled that an insured who falsely informs his insurer as to who was driving the insured vehicle at the time of the accident breaches the cooperation clause of the insurance policy. (Geico v. Fisher, 54 AD2d 1087 [4th Dept 1976].)In this matter, the insurer contends that Shaid knew who was driving his vehicle at the time of the accident and for what purpose, but intentionally misrepresented those facts to Metropolitan.

An insured breaches the condition of cooperation and seriously prejudices the insurer in handling the claims and lawsuits arising out of the accident when making false statements concerning the facts of an accident. (see State Farm Mutual Automobile Ins. Co. V Brown, 21 AD2d 742 [4th Dept. 2004].) However, even through the insurer may be prejudiced by the lack of cooperation "[t]he lack of prejudice to the insurer is immaterial when there has been a breach of a condition." (National Grange Mutual Liab. Co. v. Fino, 13 AD2d 10 [3d Dept 1961].)

In opposition, defendants, Shaid and Arshad, contend, solely as a matter of law, that the plaintiff's motion is premised on inadmissible hearsay and is therefore insufficient to make out a prima facie entitlement to summary judgment.

Hearsay is a statement made out of court offered for the truth of the fact asserted in the statement. (People v. Romero, 78 NY2d 355 [1991].) A hearsay statement may be received in evidence only if it falls within one of the recognized exceptions to the hearsay rule, and then only if the proponent demonstrates that the evidence is reliable. (Nucci v. Proper, 95 NY2d 597 [2001].)

Plaintiff contends that the statements fall under the business records exception to the hearsay rule. For the purposes of determining whether hearsay is admissible under business records exception, the concern relating to trustworthiness extends to "each participant in the chain producing the business record, from the initial declarant to the final entrant." (Matter of Leon RR, 48 NY2d 117 [1979].)

The Court of Appeals has ruled that "the statement is inadmissible hearsay if any of the participants in the chain is acting [*3]outside the scope of the business duty." Id. at 122. It is undisputed that the insured was outside the insurers enterprise at the time of the statement.

At issue though, is whether the duty of an insured to cooperate with an insurer is comparable to a business duty during an insurance investigation. (Hochhauser v. Electric Insurance Co., 46 AD3d 174 [2d Dept 2007].) However, "despite potential consequences which may befall an insured who fails to provide accurate and truthful information to, or to cooperate with, an insurer, the insured's statement to the insurance investigator . . . was not made under the circumstances which create a high probability that the statement was truthful." (Corsi v. Town of Bedford, 58 AD3d 225, 231 [2d Dept 2008], quoting Hochhauser v. Electric Insurance Co., 46 AD3d at 1823.)

The essence of the business records exception to the hearsay rule is that records systematically made for the conduct of business are inherently highly trustworthy because (1) the records are routine reflections of the day to day operations of a business; (2) the entrant is obliged to be truthful and accurate for purposes of conducting the enterprise.(Hochhauser v. Electric Insurance Co., 46 AD3d 174 [2d Dept 2007].)

Here, the insured was outside of the insurer's enterprise and was not communicating information regarding the accident under the compulsion of any business duty. (see generally, Matter of Leon RR, 48 NY2d 117 [1979].) Accordingly, the statements made by Shaid and Arshad to the insurance investigator do not constitute a business record. Without the benefit of the business record exception, the plaintiffs statements to the investigator are simply impermissible hearsay.

For the reasons set forth above, Metropolitan's motion for an order pursuant to CPLR 3212 granting summary judgment against defendants, Shaid and Arshad, is denied.

Plaintiff's request for a default judgment against defendants, Roya Marvisi and Justin Marvisi, by his parents and natural guardian, Roya Marvisi, is likewise denied. Where a valid cause of action is not stated, the party moving for judgment is not entitled to requested relief, even on default. (Green v. Dolphy Const. Co.,Inc., 187 AD2d 635 [2d Dept 1992].) Accordingly, as the cause of action is based on inadmissible hearsay, and therefore not valid, plaintiff's request for a default judgment against the defendants Ravisi is denied.

Dated: May 21, 2009

BERNICE D. SIEGAL,,J.S.C.