In Lema v. Tower Insurance Co. of New York, after a fire at his premises, the insured sought to recover under his homeowners’ insurance policy issued by Tower. In the insurance application, the insured represented that the subject premises was a two-family residence. Tower later discovered that the premises actually contained three separate residences, each with its own kitchen, bathroom and separate entrance. Despite this revelation, the trial court denied Tower’s motion to dismiss the insured’s complaint. T

In order to establish a prima facie case for rescission of an insurance policy the insurer must show that; 1) the insured made a material misrepresentation in the insurance application, and 2) if the insurer knew the truth it would not have issued the policy. Tower submitted an affidavit from its underwriting managers and its “Homeowners Selection Rules,” which demonstrated that it would not have issued the same policy had it known that the premises contained three dwellings. The trial court denied Tower’s motion because it found the underwriter’s affidavit conclusory. The Second Circuit disagreed, holding that, together, the affidavit and the rules were sufficient evidence to establish materiality as a matter of law.

This holding demonstrates that while an affidavit from the insurer may be sufficient on its own, it is always preferable to support a rescission argument with “objective” proof.

Thanks to Steve Kaye for his contribution to this post.  For more information, please write to Mike Bono.