In Morley Maples, Inc. v Dryden Mut. Ins. Co., the Appellate Division, Third Department recently confirmed that the insured bears the burden of overcoming an insurer’s arson defense in a first-party property claim in order to prevail on a motion for summary judgment. Once an insurer shows that its insured may have been responsible for starting the fire that resulted in property damage, the insured must demonstrate that it is free of any culpability. It is not enough to simply attack an insurer’s investigation as insufficient.

While the drops of morning dew were still forming at the start of another Spring day in May 2010, a fire sparked inside a restaurant in the sleepy upstate town of Morley, NY. The restaurant owned by Morley Maples, Inc. became engulfed in flames and burned to the ground.

Morley Maples sought coverage under its multi-peril insurance policy, but after an investigation, the insurer determined that foul play was afoot; the early-morning fire appeared to have been intentionally set. Therefore, the insurer disclaimed coverage and the insured sued for breach of the insurance contract.  The insurer pleaded affirmative defense of arson in its answer.

The Appellate Division, Third Department affirmed the trial court’s decision to deny Morley Maples’ motion for summary judgment finding the insurer’s determination that the fire was caused by arson sufficiently supported by a surveillance video. The footage depicted “an individual sliding along an exterior wall of [the insured’s] building, while appearing to attempt to avoid detection, before entering the building with the use of a key, and later exiting the building moments before smoke appeared in the bar area.” Moreover, the Court found that the insurer raised another question of fact because Morley Maples stood to gain more if the building was burned down than if it simply sold the building.  Therefore, the surveillance video created a triable issue of fact.

The parties will now proceed to trial.  In order to prevail, the insurer must establish arson by clear and convincing evidence – but that heightened standard is not required to defeat a motion for summary judgment, as made clear here.

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