131_C100

Insured's Material Misrepresentation In Application Warranted Denial Of Coverage

Commercial Property	Misrepresentation
Fire	Application

Bleeker Street Health & Beauty Aids, Inc. (Bleeker) submitted an application for fire insurance to Granite State Insurance Company (Granite). In the application, Bleeker stated that no business establishment in the building utilized a deep fat fryer. A fire subsequently occurred, originating on the premises of an upstairs restaurant. Granite denied coverage, stating that Bleeker's application contained a material misrepresentation of the facts and that the building did have a restaurant occupancy that used a deep fat fryer. Bleeker brought an action against Granite for breach of contract and negligence for the losses it sustained in the fire. Granite filed a motion for summary judgment and requested the complaint against it be dismissed. Bleeker filed a cross motion for summary judgment. The Supreme Court, New York County entered summary judgment in favor of Granite and Bleeker appealed.

In the appeal to the Supreme Court, Appellate Division, Granite demonstrated that the misrepresentation was material. It submitted an appropriate affidavit from its underwriter, along with a description of the way its computer system handled such applications and included excerpts from its underwriting guidelines. While the guidelines stated only that the type of hazard at issue was "to be considered" rather than coverage automatically being denied (because the computer logic system itself does not automatically deny coverage), the underwriter stated as an invariable fact based on her experience that Granite's position was to always deny coverage in cases where an application indicated an operating deep fat fryer on the premises of the location occupied by the proposed insured. The court acknowledged that an answer to an ambiguous question on an insurance application cannot be the basis for a claim of misrepresentation. However, it determined that the question on the application was not ambiguous. In addition, as determined by the trial court, if Bleeker's president saw only the signature page of the application he signed, as he testified, he could not have been misled by any unclear language. 

The appellate court upheld and affirmed the trial court's decision that granted summary judgment to Granite and that Bleeker's material misrepresentation in the application warranted denial of coverage following the fire. 

Bleeker Street Health & Beauty Aids, Inc., Plaintiff-Appellant v. Granite State Insurance Company, et al, Defendants-Respondents. 38 A.D.3d231, 834 N.Y.S.2d l, 2007 N.Y. Slip Op. 01801.