D'Agostino v Allstate Ins. Co.

[*1] D'Agostino v Allstate Ins. Co. 2015 NY Slip Op 51479(U) Decided on September 16, 2015 Supreme Court, Richmond County Straniere, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 September 16, 2015
Supreme Court, Richmond County

Peter D'Agostino and JOAN GALANT, Plaintiff, v Allstate Insurance Company and SONG J. YUN, Defendant.



100974/13



Attorneys

(Plaintiff)Michael P lagnado

55 Wall Street, Suite 810

N.Y., N.Y. 10005

(Defendant)Feldman Rudy Kirby & Farquharson,

Brian R Rudy Esq.

410 Jericho Turnpike, Suite 315

Jericho, NY 11753
Philip S. Straniere, J.

Plaintiffs, Peter D'Agostino and Joan Galant, allege that defendant Allstate Insurance Company wrongfully disclaimed coverage for a vandalism claim filed on December 10, 2012 in regard to the premises, a two-family dwelling, located at 18 Evergreen Avenue, Staten Island, New York. In addition, there is a negligence claim alleged by the plaintiffs against defendant, Song J. Yun, the agent who processed the policy application, for not providing the proper insurance.

It should be noted that the Peter D'Agostino who was the insured on the policy has been referred to throughout this jury trial as "Senior" (Sr) and the Peter D'Agostino who lived at the premises has been called "Junior" (Jr). Both of them testified.

Plaintiffs in their complaint alleged six causes of action. Four against defendant Allstate and two against defendant Yun.

The first cause of action is against Allstate for breach of contract for failing to pay plaintiffs claim.

The second cause of action is against Allstate for breach of contract for not paying the current claim after having paid prior claims and not raising any defense in regard to plaintiffs' residency or occupancy in any of those claims.

The third cause of action is against Yun for negligence in failing to obtain proper insurance coverage for the plaintiffs.

The fourth cause of action is against Yun for breach of a duty to plaintiffs to obtain proper insurance coverage.

The fifth cause of action against Allstate is based on the theory of imputing Yun's negligence to Allstate.

The sixth cause of action against Allstate is based on the theory of imputing Yun's breach of duty to plaintiffs to obtain proper insurance coverage.

Defendants denied the plaintiffs allegations and asserted seven affirmative defenses.

The first affirmative defense is that because the named insured did not reside at the insured dwelling there is no coverage.

The second affirmative defense is that the plaintiffs failed to state a cause of action.

The third affirmative defense asserts that the culpable conduct of the plaintiffs caused the alleged damages.

The fourth affirmative defense asserts various equitable defenses.

The fifth affirmative defense asserts any defenses of Allstate are defenses of Yun under the terms of the policy.

The sixth affirmative defense asserts the statute of limitations on behalf of Yun.

The seventh affirmative defense is that the plaintiffs failed to comply with the terms of the insurance policy by not notifying the defendants as to changes in the use and occupancy of the premises.

At the close of testimony each side moved for a directed verdict in their favor.

Issues Presented:

A. Should the Issue of Waiver and Estoppel be Decided by the Court?

One part of the directed verdict motion by defendants Allstate and Yun, is addressed to the issue of whether the doctrine of waiver and estoppel asserted by plaintiffs as a counterdefense to defendants' affirmative defense of lack of coverage and rescission of the policy based on the nonresidency of the insureds, is based in equity so as to be decided by the court as asserted by the defendants, or one founded in law for the jury, as argued by the plaintiffs.

Civil Practice Law and Rules (CPLR) §4101 provides "equitable defenses and equitable counterclaims shall be tried by the court:..." Courts have held that estoppel is a doctrine purely equitable in nature and even if certain factual questions may have to be resolved in order to determine the issue of estoppel, it is an issue for the court to decide and not a jury [Grant v Guidotti, 67 AD2d 736 (1979); Tober v Schenectady Savings Bank, 54 AD2d 1049 (1976); Menado Corp. v Indemnity Ins. Co. of North America, 53 Misc 2d 533 (1967)]. This is the rule even if the plaintiffs' cause of action sounds at law.

Waiver is the voluntary and intentional relinquishment of a known right while estoppel occurs when an insurer acts in a manner inconsistent with a lack of coverage and the insured reasonably relies on those actions to the insured's detriment [Burt Rigid Box, Inc. v Travelers Prop. Cas. Corp., 302 F.3d 83 (2002)].

There is no indication that the defendants voluntarily or intentionally relinquished their right to disclaim coverage and rescind the policy based on the plaintiffs' nonresidence at the insured premises. Therefore, waiver is not an issue in this case.

It is conceded that at no time during the period when Allstate covered the premises, 18 Evergreen Avenue, with a Primary Homeowners' Policy did either insured reside or intend to reside at the dwelling.

Plaintiffs have raised an issue of estoppel because defendants made no attempt to learn who actually lived at the premises and yet issued a Homeowners Policy to plaintiffs in November 2012 prior to the date of the loss in December 2012. In fact, defendants had issued a Homeowners' Policy to plaintiffs each year beginning in 2002, when plaintiffs obtained title, even though the plaintiffs did not reside at the insured premises since 1978 for D'Agostino, Sr. and since about 1995 for Galant. During that entire time period of plaintiffs' ownership, the defendants collected premiums from the plaintiffs and paid on two property damage claims, one in 2004 and another in 2009.

The issue of whether the defendants are estopped from asserting a defense of misrepresentation by the plaintiffs of their residence is equitable in nature and must be decided by the court in the first instance.

Analysis of plaintiffs' first two causes of action leads the court to question whether they are equitable claims and not actions at law. The plaintiffs are in effect asking for specific performance of the terms of the insurance contract by Allstate and payment of the damages submitted by their respective adjusters. The compelling of defendants to honor the terms of the [*2]policy is an equitable cause of action and must be decided by the court. The plaintiffs are in effect saying that Allstate should pay the claim as set forth in the contract. The amount of the claim, which is asserted as "damages", is secondary to enforcing the terms of the policy. It does not make this an action at law.

If the contention of the plaintiffs that they never received a "disclaimer" letter from defendants prior to commencing the lawsuit in May 2013 is correct, then it would further support the conclusion that this is an equitable action for specific performance of the insurance contract. Defendants disputed this allegation. Neither side ever placed any documentation into evidence from which either the court or a jury could conclude which party is correct. The case law would make it a moot issue in any case.

There is a second reason why the issues of this case must be decided by the court. While the materiality of a misrepresentation is ordinarily a jury question, materiality becomes an issue for the court to determine when the evidence concerning materiality is clear and substantially uncontradicted [Kiss Construction NY, Inc. v Rutgers Casualty In. Co., 61 AD3d 412 (2009)]. Here the evidence is undisputed that the plaintiffs did not reside at the insured premises. There is no dispute as to this fact. In insurance law, the residency of the plaintiffs is a material fact as to the existence of any coverage. This requires the court and not the jury to decide the issue whether this information was material as a matter of law.

As the court stated in Marshall v Tower Ins. Co., 44 AD3d 1014 (2007),"(t)he construction of terms and conditions of an insurance policy that are clear and unambiguous present a question of law to be determined by the court when the only issue is whether the terms as stated in the policy apply to the facts." As set forth below, the issue of residence becomes a matter of law for the court to decide.

The defendants are correct; the issue of the defendants' right to rescind the policy and plaintiffs' counterdefense of estoppel are for the court to decide and not the jury.

B. Did the Plaintiffs "Reside" at the Premises?

The Allstate Policy between the plaintiffs and the defendants contains the following definitional provisions:

1. "You" or "your"-means the person named on the Policy Declarations as the insured and that person's resident spouse....

3. "Insured person(s)" -means you and, if a resident of your household:

a) any relative; and

b) any dependent person in your care....

7. "Residence Premises"-means the dwelling, other structures and land located at the address stated on the Policy Declarations.

8. "Insured premises"-means:

a) the residence premises:

Although the insurance policy does not define the term "residence," case law has [*3]established an accepted meaning for that term which requires some degree of a permanent presence at the insured premises with an intention to remain. Neither plaintiff meets those criteria.

The exhibits in this case establish that title to the premises 18 Evergreen Avenue was conveyed to the insureds Peter D'Agostino and Joan Galant by a deed dated June 4, 2002 from their mother. The deed lists D'Agostino's address as 21 Atlantic Avenue, Staten Island, New York and Galant's address as 84 Jerome Road, Staten Island, New York. The testimony at trial was that for years before the date of this deed neither D'Agostino nor Galant resided at 18 Evergreen Avenue and up to the present date, neither of them have resided or intended to reside at the insured premises. Testimony by D'Agostino that he went into title in 2001 and later added Galant to the deed is contradicted by the documentary evidence recited above.

On April 18, 2012 D'Agostino and Galant executed a new deed for 18 Evergreen Avenue. This conveyance vested 50% ownership in D'Agostino and his wife, Anna D'Agostino, both residing at 21 Atlantic Avenue and 50% in Galant at 84 Jerome Road. There is no indication that the plaintiffs ever gave notice of the change in title to the defendants.

This new deed, which was executed in April 2012 six months before the insurance policy in question went into affect on November 5, 2012, and seven months before the claim was filed on December 10, 2012, clearly discloses that neither named insured for 18 Evergreen Avenue, claimed 18 Evergreen Avenue as their residence.

It may be argued that these deeds both are public records and the defendants by doing a title search could have determined that neither insured resided at the premises or at minimum could have triggered a duty to inquire by defendants as to the residency status of the insured. This court has in the past held other professionals, such as real estate brokers, to a standard of making inquiry of public records before taking listings on property or relying on the representations of homeowners. It is not too much a logical stretch to extend such a requirement to insurance agents and brokers accepting a policy application prior to issuing an insurance policy.

There is one problem with extending this requirement to insurance companies. The insurance policies are issued based on the information provided by the insured and the insured has a duty to provide accurate information to the carrier or an agent acting on behalf of a carrier. The control imposed to guarantee that the insured is truthful is the policy provisions permitting the carrier to disclaim coverage for material misrepresentations. In the insurance situation the person making the statement suffers the consequences of the applicant's misstatements. The fact that by the exercise of diligence by the carrier might have discovered the falsity of the representation does not relieve the person making the statement from the consequences of his act [Colin v Hamilton Fire Ins. Co., 251 NY 312 (1929)]. Insurance law requires the insured or policy applicant to provide truthful and accurate information to the agent or carrier or suffer the repercussions of their misstatements.

This is not the case with real estate brokers taking listings where a third party purchaser [*4]will harmed if the broker relies on misstatements of the seller, and where the broker is the agent for the seller as the principal. Because the insurance industry differentiates between brokers and agents, applying the duty to investigate every application submitted to the insurance agent, is not practical. Applying such as requirement to an insurance broker might make sense, as the broker is acting for the benefit of the person submitting the information. There is no evidence that defendant Yun and his predecessor were acting as brokers for the insureds. The testimony is that they were acting as agents for Allstate.

There is another problem however, with extending such a requirement to insurance agents, and that is the fact that courts have determined that a person may have more than one residence for insurance coverage purposes and that it is possible to insure two primary residences [Waldburn v State Farm Fire and Casualty Company, 215 AD2d 837 (1995); Allstate Ins. Co. v Rapp, 7 AD3d 302 (2004)]. Based on this line of cases, even if defendants had information that the plaintiffs had other residences, it would not preclude them from having a second residence which would qualify for primary homeowners' insurance coverage.

The standard for determining residency for purposes of insurance coverage requires something more than temporary or physical presence at the insured premises. A person must show some degree of permanence and an intention to remain [Neary v Tower Insurance, 94 AD3d 725 (2012)]. Mere intention to reside at a certain premises is not sufficient [Vela v Tower Insurance Co of NY, 83 AD3d 1050 (2011)]. However, even though these are standards to apply in insurance litigation where residency is an issue, they are not relevant here. There is no dispute that the named insureds did not reside at the insured premises or ever intended to reside there.

Defendants have sought to rescind the insurance contract and disclaim coverage on the ground that the named insureds did not reside at the insured premises. To establish the right to rescind an insurance policy, an insurer must show that the insured made a material misrepresentation of a fact when the insured secured the policy [Interboro Insurance Company v Fatmir, 89 AD3d 993 (2011)]. A misrepresentation is material if the insurer would have not issued the particular policy if it had known the facts misrepresented [Varshavskaya v Metropolitan Life Ins. Co., 68 AD3d 855 (2009)].

New York law entitles an insurer to rescind an insurance policy if it was issued in reliance on a material misrepresentation [Fidelity & Guaranty Ins. Underwriters, Inc. v Jasam Realty Corp. 540 F.3d 133 (2008)]. If an insurer can show that it was induced to accept an application that it might otherwise have refused it is entitled to rescind the policy [In re WorldCom, Inc. Sec. Litig., 354 F.Supp 2d 455 (2005)]. So long as a misrepresentation is material it is no defense to an action for rescission that the misrepresentation was innocently made. The coverage may be rescinded even as to those insureds who had no knowledge of any misrepresentation [Continental Casualty Co. v Marshall Granger & Co, LLP, 6 F.Supp3d 380 (2014)].

The test to be applied does not require the insurer to show it would not have issued any policy at all to the insured; it only has to show it would not have issued the policy in question [Kantrowitz v Paul Revere Life Ins. Co., 1997 WL 128463 SDNY 1997)].

The Insurance Law §3105 addresses the issue as well. It provides:Representations by the insured(a) A representation is a statement as to past or present fact, made to the insurer by, or by the authority of, the applicant for insurance or the prospective insured, at or before the making of the insurance contract as an inducement to the making thereof. A misrepresentation is a false representation, and the facts misrepresented are those facts which make the representation false.(b)(1) No misrepresentation shall avoid any contract of insurance or defeat recovery thereunder unless such misrepresentation was material. No misrepresentation shall be deemed material unless knowledge by the insurerof the facts misrepresented would have lead to a refusal by the insurer to make such contract....(c) In determining the question of materiality, evidence of the practice of the insurer which made such contract with respect to the acceptance or rejection of similar risks shall be admissible.

Applying the statute to the facts of the case leads to the conclusion that the plaintiffs had the obligation to provide accurate information as to who resided at the insured premises. It also must be concluded that not residing at the insured premises is a material fact that the insurer must be told because it triggers the issuance of a different type of policy, a Standard Landlord's Policy rather than a Homeowners' Policy, because the risk assessment is different for properties rented than dwellings owner occupied. The test is whether the misrepresentation has deprived the insurance company of its right to exercise its choice of risk to take [Greene v United Mutual Life Ins. Co., 38 Misc 2d 728, affd. 23 AD2d 720 (1963)].

Even without the existence of all of the above case law, under the terms of the insurance contract, the burden to provide accurate information falls on the insured. The policy states:

Insuring AgreementIn reliance on the information you have given us, Allstate agrees to provide the coverages indicated on the Policy Declarations. In return, you must pay the premium when due and comply with the policy terms and conditions, and inform us of any change in title, use or occupancy of the residence premises....The terms of this policy impose joint obligations on the person named on the Policy Declarations as the insured and on that person's resident spouse. These persons are defined as you or your. This means that the responsibilities, acts and omissions of the persons defined as you or your will be binding upon any other person defined as you or your.The terms of the policy imposes joint obligations on persons defined as an insured person. This means the responsibilities, acts and failure to act of a person defined as an insured person will be binding upon another person defined as an insured person.Coverage ChangesThe coverage provided and the premiums for the policy is based on information you have [*5]given us. You agree to cooperate with us in determining if this information is correct and complete. You agree that if this information changes, is incorrect or incomplete, we may adjust your coverage and premium accordingly during the policy period.

The policy gives Allstate the right to cancel a policy in effect for more than 60 days by giving notice to the insured for any of the following reasons:...

2) the policy was obtained by fraud, material misrepresentation or concealment of material facts;3) material misrepresentation, fraud, or concealment of material facts in presenting a claim, or violation of any of the policy terms;...The policy also states:Concealment or FraudThis policy is void if obtained by misrepresentation, fraud, or concealment of material fact....

The above being the case, defendant Allstate is fully within its rights to disclaim coverage and void the policy. The misrepresentation as to the residence of the insured is a material fact and even if innocently made by the insureds, created a higher risk for Allstate. The fact that Allstate would have issued a Landlord's Policy and did subsequent to the claim being filed, is irrelevant to it asserting its rights under the terms of the policy and the Insurance Law to disclaim coverage.

The uncontradicted testimony from the witnesses is that they would not have issued a Homeowners' Policy to the plaintiffs had they known the plaintiffs did not reside at the premises.

Common sense may lead to a conclusion that because Allstate would have covered the loss had the proper policy been in effect, they could have just processed the claim and deducted the amount of the increased premium from the payment due the insureds. This would have put all parties in the position they would have been in had the proper insurance been obtained. For reasons not part of the record, Allstate chose not to do so and sought to enforce its rights under the law to disclaim coverage and rescind the policy. The fact that Allstate did issue a Landlord's Policy to the plaintiffs in January 2013 after the claim was denied, does not change the fact that the plaintiffs did not provide Allstate with the correct information in order to obtain the proper insurance.

Also any claim by D'Agostino, Jr., the son of plaintiff, who was the tenant in the first floor apartment at the premises also can be disclaimed as Jr. does not qualify as an "insured person" even though a relative, because the insureds do not reside at the premises.

As a matter of law, the plaintiffs did not reside at the premises when the claim was made and Allstate was within its rights to disclaim coverage and rescind the policy.

C. Is Allstate Estopped From Disclaiming Coverage?

Plaintiffs assert that all of the above analysis is moot because the defendants are estopped from raising any defense based on the plaintiffs not residing at the premises.

Plaintiffs cite the following facts.

1. Neither named insured on the policy have lived at the premises since they took title from their mother in 2002, yet the defendants continued to issue a homeowners policy to them. The fact is that their mother had an Allstate policy for many years before title was transferred and the plaintiffs elected to stay with Allstate when they became owners.

2. At the time plaintiffs went into title in 2002, D'Agostino, Sr., actually resided at 21 Atlantic Avenue, Staten Island, New York which he had owned since 1978, while Galant, actually resided at 84 Jerome Road, Staten Island, New York with her in-laws since 1999. D'Agostino, Sr. also had a Primary Homeowners' Policy for 21 Atlantic Avenue, at that time with Allstate. Plaintiffs contend the defendants knew or should have known they had issued two Primary Homeowners' Policies to D'Agostino, Sr., if they checked their records. Plaintiffs allege and Yun testified that a check of the computer records would have revealed that D'Agostino in fact had two Primary Homeowners' Policies with Allstate between 2004 and the present and yet they never questioned him about the apparent contradiction in coverages.

Plaintiffs had 21 Atlantic Avenue listed on both policies as their address for billing and notices. All premiums were paid from a joint account with Galant listing 21 Atlantic Avenue as their address. Galant has never resided at 21 Atlantic Avenue.

3. In 2004, D'Agostino, Sr. transferred the homeowners insurance on 21 Atlantic Avenue from Hartford Insurance to Allstate. D'Agostino had originally transferred from Allstate to Hartford a few years earlier in order to take advantage of lower rates through the AARP. During the period he was with Hartford, he continued to have the address for notice and billing on the 18 Evergreen Avenue policy as 21 Atlantic Avenue. In 2010 there was a claim filed for D'Agostino, Sr. for 21 Atlantic Avenue with Allstate which was processed and paid. At that time no one on behalf of the defendants raised any issue as to why he had two Primary Homeowners' Policies.

4. Plaintiffs filed water damage claims in 2004 and in 2009 for the first floor apartment and basement at 18 Evergreen Avenue which Allstate investigated and paid. Beginning in 2003 Peter D'Agostino, Jr., the son of the plaintiff, resided in the first floor unit. There was a tenant in the second floor unit. Plaintiffs contend that at no time were they asked by Allstate if they resided at the premises and had they been so asked, they would have said no. Defendants assert that even if it could be imputed that they had knowledge that D'Agostino Sr., lived elsewhere because of the two Homeowners' Policies, because they had no knowledge of where Galant resided, they were permitted to assume, because it was a two family dwelling she occupied one unit.

5. On June 18, 2012, plaintiffs applied to Allstate to amend the coverages on 18 Evergreen Avenue, so as to reduce the cost of the annual premiums. Although the document has [*6]two pages, the copy placed into evidence only has one page. The notice amending coverage was addressed to plaintiffs at 21 Atlantic Avenue. On September 25, 2012 a second amendment to the 18 Evergreen Avenue policy was issued to plaintiffs to be effective November 5, 2012 changing some of the coverages so as to reduce costs. This notice too was sent to 21 Atlantic Avenue.

All of the above may be accepted as true. However, these occurrences do not alter the fact that under the law the obligation to provide accurate information falls on the insured. There is no requirement in the statutes or case law that the agent or carrier has to inquire as to the accuracy of the applicant's statements. The insurance contract set forth in the policy also places that burden on the insured. The motivation for the insured to provide accurate information is that incorrect information, if material, would permit the carrier to disclaim coverage.

The duty to provide accurate information is a continuing one. It exists irrespective of the time when a change in circumstances may occur which would affect the coverage. Even in situations where each year the policy is renewed, the terms and conditions remain in effect. At no time did the insured ever affirmatively notify Allstate that they did not reside at 18 Evergreen Avenue. This was their responsibility. By not providing accurate information to defendants, they received a lower annual premium.

It should also be noted that although Anna D'Agostino was now also in title as of April 18, 2012, neither of the two policy amendments after that date reflect that information being given to defendants. She is not added until after the claim was made and the insurance changed to a Landlord's Policy.

There are two other factors that cause the court to question the defense of not knowing that they should notify the carrier. First D'Agostino Sr., was a member of the New York City Fire Department for thirty years. It is not credible that he failed to acquire some information regarding the differences in insurance for buildings even peripherally over the years. It should be noted that there is no allegation of fraud against either plaintiff.

Second, and more important, D'Agostino Jr. is a licensed public adjuster in New York [Insurance Law Article 21]. It is his business to know the differences between insurance coverages as he processes claims with carriers for insureds suffering losses. He resided at 18 Evergreen Avenue since about 2003. He admitted and his father concurred, that D'Agostino Jr., processed the two claims at 18 Evergreen Avenue (2004 & 2009) and the one claim at 21 Atlantic Avenue (2010) for his father. Yet he never said anything to his father concerning the nature of the two policies nor did he advise the agent or adjusters from Allstate that they had issued two Primary Homeowners Policies to D'Agostino Sr. and Galant. In fact, the Allstate adjusters who testified at trial both indicated that they believed that Jr. was the named insured and they were never corrected in that assumption by Jr. or the plaintiffs.

Insurance Law §2108(o) in regard to public adjusters provides:No licensee shall in connection with the transaction of his business as an adjuster make any misrepresentation of facts or advise any person on questions of law.

D'Agostino, Jr., required specialized training in order to be licensed as public adjuster including familiarity with the different types of insurance policies. The statute also places on him an affirmative duty not to make any misrepresentation of facts. The statute does not limit the misrepresentation of facts to the public adjuster's dealing with the insured. That duty runs both to the insured and the carrier. D'Agostino was acting on behalf of his father and aunt. The fact that he was not being compensated is irrelevant. He is a licensed professional and he had the obligation to notify the carrier of any misrepresentations or mistake of facts he discovered. D'Agostino, Jr., knew or should have known that the insureds should have had a Landlord's Policy and not a Homeowners' Policy. He was the agent for the insureds. His knowledge will be imputed to the insureds. He processed the 2004 and 2009 claims with Allstate for the insureds and should have advised his father and aunt, if not Allstate directly, in 2004 that they had the wrong coverage. Perhaps he did not do so because he received payment from Allstate for property damage to his personalty in one if not both of those claims. If he did raise the issue at that time, he would have had to have absorbed the financial loss if Allstate disclaimed coverage based on nonresidence of the named insureds.

The counterdefense of estoppel is not available to plaintiffs. Plaintiffs direct claims against Allstate are dismissed as a matter of law. They have failed to meet their burden of proof on this equitable counterdefense. Defendants have met their burden of proof on their equitable claim of rescission. As noted above, if plaintiffs claim is really one for specific performance, an equitable claim, plaintiffs have failed to meet their burden of proof in that regard as well.

D. Are the Negligence Claims Jury Questions?

Plaintiffs have also asserted negligence claims against the defendants arising from defendant Yun's and his predecessor owner's failure to procure the proper insurance for plaintiffs when they initially insured the premises after having gone into title in 2002.

In order for there to be negligence, plaintiffs must establish that the defendants owed a duty to the plaintiffs, that the defendants breached that duty and that the breach of that duty caused the damages. Whether a defendant owes a duty of care to the plaintiff is an issue of law to be determined by the courts [Donohue v Copiague Union Free School District, 64 AD2d 29 (1978)].

The law is clear that notice to an agent is generally notice to the carrier so that any knowledge the agent acquires will be imputed to the carrier [Waldron v New York Central Mutual Fire Ins. Co., 88AD3d 1053 (2011)]. Therefore if defendant Yun had a duty to obtain proper insurance coverage for the plaintiffs and was negligent in failing to do so, that failure will be imputed to Allstate.

The first issue to be addressed is whether Yun was an "agent" or a "broker" [Insurance Law §2101]. An "agent" is an agent for the insurer, while the "broker" seeks to procure insurance for an "insured." The evidence seems to be clear that in this case, defendant Yun and his predecessors were acting as "agents" and not "brokers." Their loyalty was to the carrier as the principal. Obviously, whether an agent or a broker there is an implied covenant of good faith and [*7]an obligation to provide the proper insurance for the insured based on the information the agent receives from the insured.

But as set forth above, the obligation to provide accurate information is on the insured/applicant. Plaintiffs had the initial duty and burden of notifying the agent of their true relationship to the premises, that is that neither of them actually resided there. Had they given accurate information to the agent, the facts establish a Landlord's Policy would have been issued and it would have provided vandalism coverage. As noted above, the law does not require the carrier or its agent to go beyond the information provided by the insured.

A plaintiff/insured may only prevail in a negligence action against a broker where the plaintiff can establish that the plaintiff made a particular request to the broker for a specific coverage and the requested coverage was not procured [Voss v Netherlands Ins. Co., 22 NY3d 728 (2014); Hoffend & Sons, Inc. v Rose & Kiernan, Inc., 7 NY3d 152 (2006)]. The burden is on the plaintiffs to establish that they made a request for a particular policy and the broker failed to procure it. Plaintiffs have not submitted any proof that they gave the agent the proper information or requested anything other than a homeowners' policy. There is no evidence that the plaintiffs ever gave the defendants the proper information. They argue that the defendants should have known the information provided was inaccurate by conducting an independent investigation and comparison of their own records. There is no requirement in insurance law for the defendants to do that. There is no continuing duty on the part of a broker or agent to advise, guide or direct a client to obtain additional coverage [American Building Supply Corp. v Petrocelli Group, Inc.

19 NY3d 730 (2012)].

The sole exception to the common law duty of a broker to only obtain the insurance requested is if there is a particularized situation where the agent through its conduct, or by an expressed or implied contract with the client acquires additional duties beyond that of the common law [Murphy v Kuhn, 90 NY2d 266 (1997)]. The court in Murphy identified three exceptional situations which might give rise to a special relationship thereby creating an additional duty of advisement. These are (1) the agent receives compensation for consultation apart from the payment of premiums; (2) there was some interaction regarding a question of coverage with the insured relying on the expertise of the agent; or (3) there is a course of dealing over an extended period of time which would have put an objectively reasonable insurance agent on notice that its advice was being sought and specially relied on by the client.

The court in Murphy acknowledged that the insured is required to put forth a "high level" of proof. The record at trial establishes that the plaintiffs did not meet their burden of proof to establish the existence of a special relationship under any of the above three categories.

The plaintiffs received what they requested and what an agent would provide based on information received from the insureds. There is also a presumption that an insured knows the contents of a policy in the insured's possession. This knowledge precludes a claim for negligence or breach of contract against the broker or agent [Hoffend & Sons, Inc., supra]. If the plaintiffs had read over the terms of the Allstate Policy in 2012 or in the decade before the claim was [*8]denied, they would have known they had the wrong coverage as they did not reside at the insured premises and it was a policy designed to insure an insureds residence and not a rental property.

Plaintiffs allege that Yun was negligent in that had he checked the records he would have seen D'Agostino Sr. had more than one Owners Policy at the same time and therefore should have questioned him. As set forth above, a person can have more than one residence so that information in and of itself would not create a duty to inquire. Also, there was no additional information concerning where Galant resided and since 18 Evergreen Avenue was a two-family dwelling, it could be presumed she resided there. The duty to provide the correct information is on the insured.

In fact, because a Landlord's Policy has a premium cost about 50% more than that of a Homeowners' Policy, it would inure to the defendants benefit to have sold plaintiffs' a Landlord Policy if they had the proper information.

The duty to provide proper coverage presumes that the insureds have met their statutory and contractual duty to provide accurate information. Plaintiffs have never established that they did so. The plaintiffs had a duty to provide accurate information to the defendants. The plaintiffs breached their duty.

Further, because plaintiffs are asserting that the defendants breached a duty, plaintiffs must establish what the standard is in the insurance industry for obtaining information when an application is made or renewed. Expert testimony was needed to establish what the practice of insurance agents and brokers in New York City is in this regard. No such testimony was elicited in this regard. Yun testified that it is not his practice and procedure to do so because they rely on the accuracy of the information provided by the insured. Plaintiffs provided no testimony to contradict this as the accepted practice.

It is a question of law as to be determined by the court if there was a breach of duty by the defendants. Based on the above, plaintiffs have failed to prove a necessary element of their negligence claim. They have not established that the defendants had breached any duty to the plaintiffs. The failure to have the proper coverage resulted solely from the actions of the insured. They have not made out a prima facie case.

Conclusion:

Plaintiffs' motion for a directed verdict is denied.

Defendants' motion for a directed verdict is granted.

There are no issues to be decided by the jury. Plaintiffs' complaint is dismissed on the law.

Because the Homeowners' Policy was rescinded, plaintiffs are entitled to a refund of the premium [Kiss Construction NY, Inc. supra]. If the premium was not adjusted when the [*9]Landlord's Policy was issued in January 2013, after the claim was denied, the parties are directed to make such adjustment now.

In addition, because the defendants should not have paid on the 2004 & 2009 claims had they known the plaintiffs did not reside at the premises, and as they did not seek reimbursement in this litigation, they are barred from doing so.

The foregoing constitutes the decision and order of the court.

Defendant to submit judgment on notice.

Dated: September 16, 2015

________________________

Staten Island, NY

HON. PHILIP S. STRANIERE

Acting Justice of the Supreme Court