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Damesquita v. State Farm Insurance Company

A-3551-03T2 (N.J. Super. App. Div. 2005) (Unpublished)

INSURANCE; REPRESENTATIONS—An insured has a duty to be honest when questioned by its insurer about a loss and a duty to promptly and seasonably correct any untrue statements such as concerning the whereabouts of the owner at the time of a fire.

A property owner sought to recover under his insurance policies when the building he owned, and the health club he operated in the building, were destroyed by fire. The owner claimed that he was not in the building on the morning of the fire and was unaware of the fire until he received a telephone call from the fire department. The insurance company’s investigators determined that the fire started in a storage area to which only the owner had access. They also detected the odor of kerosene, but the owner denied that there was any kerosene in the building. The county prosecutor’s office sent its investigators to the scene, where they spoke to a security guard from a building directly across the street. The security guard told the investigators that on the morning of the fire he saw the same person open the building who routinely opens the building; that he stayed there for ten minutes before clearing the snow from his car and leaving; that he returned to the building for a few minutes and left; and that ten minutes later the fire started. The security guard also told the investigators that as he was about to call the fire department, he heard the sound of fire engines approaching the scene. When asked by the investigators, the owner reiterated that he had not been to the building on the morning of the fire. When confronted with the security guard’s account, the owner confessed to being at the building but claimed that he only went there to clear the snow and check for leaks. He claimed that he did not initially tell the investigators that he was at the building because he thought they would be suspicious. The insurance company disclaimed coverage. It relied on a provision that disclaimed coverage in the event of fraud, concealment or misrepresentation of material facts. The insurance company determined that the owner lied to the company about his presence at the building shortly before the fire started. The owner claimed that coverage should not have been denied because he seasonably recanted his misrepresentation about his whereabouts. The lower court disagreed and granted the insurance company’s motion for summary judgment. The owners appealed, but the Appellate Division affirmed, finding that no reasonable fact-finder could conclude that the owner promptly and seasonably corrected the untrue statement about his whereabouts on the morning of the fire. It noted that the owner persisted in his lie for eight weeks and would have continued to lie, but for the fact that he was confronted with the security guard’s account.

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