Insurer Asserts Arb: ID Theft Victim Not Compelled

David A. Szwak

Insurer Asserts Arb: ID Theft Victim Not Compelled

Postby David A. Szwak » Mon Dec 19, 2005 8:00 pm

Not Reported in N.Y.S.2d, 2002 WL 377029 (N.Y.Sup.), 2002 N.Y. Slip Op. 40024(U)

Index No. 109708/01
Dated: February 8, 2002, New York, New York

In this article 75 special proceeding, petitioner New Hampshire Indemnity Company ("NHIC") seeks a judgment, pursuant to CPLR 7503(b) for a permanent stay of arbitration of respondents' uninsured motorist ("UM") claims. Alternatively, petitioner requests an order that requires joinder of Robinson Jeannot ("Jeannot") as an additional respondent, that mandates a framed issue hearing be held to determine whether or not respondents are entitled to coverage under the Uninsured Motorist Endorsement of NHIC's policy (the "Policy") and that temporarily stays arbitration pending a decision on the coverage issues. [FN*] Respondents Omar Flores, Roberto Chevere and Rogelio Hernandez oppose the petition, arguing that there is no basis for a stay. Respondents further request that MVAIC be joined as an additional respondent if a framed issue hearing is granted.

FN*. NHIC initially sought an order directing depositions of respondents and Jeannot. The depositions have already been taken, rendering that portion of the petition moot. Additionally, the limits of coverage under the Policy ($25,000 per person, and $50,000 per accident) are not disputed.

NHIC issued an automobile insurance policy to "Robinson Jeannot," covering a 1978 Ford Granada. The effective date of the Policy was May 2, 2000. The policy, among other things, entitles an "insured" to damages for bodily injury caused by uninsured motor vehicles. For purposes of UM coverage, an "insured" is defined as the name insured and, while residents of the same household, a spouse and relatives. "Insured" is further defined as "[a]ny other person while occupying a motor vehicle owned by the named insured or, if the named insured is an individual, such spouse and used by or with the permission of either." Uninsured Motorists Coverage Endorsement §2(a)(2)(i).
In April or May of 2000--the accident report and attorney-correspondence indicate April, but the respondents testified at their deposition that the accident was in May-- the Ford covered by the NHIC Policy was rear-ended by another vehicle, which immediately sped away. Respondent Omar Flores was driving the Ford and respondents, Roberto Chevere and Rogelio Hernandez, were passengers in the car. All three men were allegedly injured in the accident, and, on April 19, 2001, their attorney mailed a Request for UM Arbitration to NHIC.
At his deposition, Flores testified that he had borrowed the car from "a friend of a friend," named James (Flores T., at 9). All three respondents denied ever hearing of or meeting anyone named Robinson Jeannot (id., at 37; Chevere T., at 22-23; Hernandez T., at 17-18).
Jeannot, at his deposition, similarly denied having met, or even having heard of, the three respondents (Jeannot T., at 18-19). Jeannot also denied ever having owned a car (Jeannot T., at 5), and specifically denied having owned "a 1978 Ford which was a two-door car that was gray" (id., at 10-11). Jeannot further testified that he never registered a car, applied for license plates, or applied for automobile insurance (id., at 10-13). When he was shown a copy of the insurance application, Jeannot confirmed that the name, address and phone number listed were his, but stated that he never provided the information on the document, never requested that the application be submitted on his behalf and "never signed [the] document at all" (id., at 13-14, 16). When asked if he had ever worked for Kings County Hospital, the "employer" listed on the application, Jeannot responded that he had never worked there, and, in fact, that at the time of the application and of the accident, he was a student at York College (id., at 4, 14-16 ).
Jeannot explained that in the year 2000 his wallet, containing his learner's permit to drive, was stolen. Apparently, someone else, using Jeannot's name, applied for, and obtained, the automobile insurance coverage from NHIC. Thus, the "named insured" never really purchased insurance from NHIC, which issued the Policy to an imposter.
It is well-established that "the party seeking to stay arbitration ha[s] the burden of showing the existence of sufficient evidentiary facts to establish a genuine preliminary issue" which would serve as a justification for the stay. See, e.g., In re Empire Mut. Ins. Co. v Zelin, 120 A.D.2d 365, 366 (1st Dep't 1986). Where an insurance policy does not cover an accident, there is no basis for requiring arbitration and a permanent stay is appropriate. See, Travelers Property Cas. Corp. v. Hershman, 287 A.D.2d 412 (1st Dep't 2001); Matter of Government Employees Ins. Co. v. Hehl, 203 A.D.2d 570 (2d Dep't 1994).
NHIC urges that here the arbitration should be permanently stayed because the Policy does not cover this accident. First, NHIC maintains that none of the respondents is an "insured" as none qualifies as a "person * * * occupying a motor vehicle owned by the named insured * * * and used by or with [his] permission." Since respondents did not occupy a car owned by Jeannot or use the vehicle with his permission, NHIC denies that coverage--and a concomitant obligation to proceed to arbitration-- exists.
In most cases involving uninsured motorist coverage it is the identity and insured or uninsured status of the hit-and-run driver which are at issue. Here, not only are these details unknown, but even more significant, the identity of NHIC's own insured is unknown. The evidence clearly indicates that the person who applied for and obtained the Policy from NHIC was not Robinson Jeannot, but rather, was an imposter--an identity thief--who used Jeannot's name to purchase insurance.
Insuring automobiles is "a serious responsibility fraught with public interest." Allstate Ins. Co. v. Sullam, 76 Misc. 2d 87, 106 (Sup. Ct. Nassau Co. 1973); see also, Aetna Cas. and Sur. Co. v. O'Connor, 8 N.Y.2d 359, 364 (1960) ("insurance is not the concern solely of the insured and his insurer"). Thus, for the benefit of the public, carriers must investigate and verify information supplied by applicants before issuing insurance policies. Indeed, the Court of Appeals has recognized that insurers are obligated "to discover fraud at the earliest possible moment, before an accident occurs and the rights of innocent injured third parties have intervened." Aetna Cas. and Sur. Co. v. O'Connor, supra, 8 N.Y.2d, at 364.
This responsibility to verify information supplied by an applicant is particularly acute in this day and age when identity theft is rampant. See, e.g., Norman A. Willox, Jr. and Thomas M. Regan, Identity Theft: Authentication as a Solution Revisited, report released by National Fraud Center on October 2, 2001; Henry A. Valetk, New Bills Address Identity Theft, January 2, 2002 New York L. J., at 1 (col. 1) ("Identity theft is currently the nation's fastest-growing white collar crime, victimizing an alarming 500,000 Americans each year"). Accordingly, an insurer should not be permitted to raise fraud, which would have been discoverable upon a reasonable inquiry, as a basis for denying coverage to innocent third parties injured in an accident. See, Allstate Ins. Co. v. Sullam, supra, 76 Misc. 2d, at 106.
Here, a minimal inquiry would have revealed that the applicant was not who he held himself out to be. NHIC cannot invoke its own careless conduct--issuance of an insurance policy to an imposter--to avoid liability to innocent third parties. Had NHIC performed an adequate, basic investigation it would have learned that Jeannot was not the applicant and properly would have refused to insure the Ford.
NHIC's argument that there is no coverage based on the policy's terms must be rejected. Technical, strict adherence to the language of the policy, under these circumstances, would work a grave injustice and reward the insurer's negligence. Since Jeannot never owned a car and did not purchase insurance, it is impossible that anyone would qualify under the Policy as a "person * * * occupying [a] motor vehicle owned by the named insured * * * and used by or with [his] permission." In light of its failure to properly investigate the application, NHIC cannot be permitted to benefit from the premium paid while shirking its responsibility to insure lawful operators and occupants of the Ford. A permanent stay of arbitration must, therefore, be denied.
Second, NHIC argues that even if respondents can be deemed insureds, coverage does not exist because according to the police accident report and some correspondence the incident occurred in April 2000, before the effective date of the Policy. "Where there is a genuine triable issue . . ., the appropriate procedure is to stay arbitration pending a trial of the threshold issue." See, In re Empire Mut. Ins. Co. v Zelin, 120 A.D.2d, at 366, supra. Because the evidence conflicts as to when the accident took place, and thus, whether insurance coverage was in effect at the time, a framed issue hearing is appropriate.
Finally, because the unrefuted evidence establishes that Jeannot has no connection to the Policy, the accident or the car, he should not be joined in this proceeding. Additionally, since respondents have not established compliance with the procedures required by the Insurance Law, MVAIC will not be joined in the action. See, Insurance Law §§5208, 5218. Accordingly, it is
ORDERED that those parts of the Petition seeking depositions of respondents, and a judgment declaring that the actual uninsured motorist limits of coverage under the Policy are $25,000 per person, and $50,000 per accident, are denied as moot; and it is further
ORDERED that the Petition is granted to the extent that arbitration shall be temporarily stayed pending a hearing to determine whether the accident occurred within the Policy's coverage period; and it is further
ORDERED that, within thirty (30) days from the date of this Order, petitioner shall file with the Clerk of the Trial Support Office (Room 158) a copy of this Order with notice of entry, a note of issue and a statement of readiness, and shall pay the appropriate fees, if any, and said Clerk is directed thereupon to assign this matter to an appropriate Part for trial; and it is further
ORDERED that the proceeding shall be dismissed if petitioner does not comply with the immediately preceding paragraph; and it is further
ORDERED that a copy of this Order with notice of entry be served upon the attorneys for the respondents, and the arbitrator within 20 days of entry hereof; and it is further
ORDERED that petitioner's request to join Robinson Jeannot as an additional respondent is denied; and it is further
ORDERED that respondents' request to join MVAIC is denied.
This constitutes the decision and judgment of the Court.
Not Reported in N.Y.S.2d, 2002 WL 377029 (N.Y.Sup.), 2002 N.Y. Slip Op. 40024(U)

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