In Azzato v. Allstate Insurance Company, 2012 N.Y. App. Div. Lexis 6530 (2nd Dep't Oct. 3, 2012), plaintiff, Raymond Azzato, and a non-party, Richard Pleasants, purchased a residence as tenants in common. Thereafter, Azzato and his wife, Plaintiff Trisha Williamson, obtained a landlord's package insurance policy from Allstate covering the residence and personal property. Pleasants was not named as an insured under the policy. The property was damaged by fire. Allstate denied Plaintiffs' claims, and Plaintiffs brought suit.
Allstate contended that Azzato had submitted a fraudulent purchase invoice to support his claim for certain appliances allegedly damaged in the fire. In the alternative, Allstate argued that Azzato's insurable interest was limited to 50 percent of the property value, as he was only a 50 percent owner.
Allstate also argued that it was entitled to summary judgment dismissing the complaint against Williamson, since she was not named on the deed to the property, and, therefore, had no insurable interest.
On defendant's motion for summary judgment, Supreme Court found triable issues of fact regarding concealment and fraud by Azzato and also, whether the policy limited recovery to the plaintiffs' insurable interests, since the Court found the insurable interest provision of the policy ambiguous.
On appeal, the Appellate Division, Second Department found that Allstate had established its entitlement to summary judgment "by demonstrating that Azzato breached the concealment and fraud provision of the policy when he submitted proof, in support of his claim, purporting to establish the cost of the appliances allegedly located in the subject dwelling at the time of the fire. The defendant established that the price values submitted by Azzato were significantly inflated from the actual price that he paid***." The Court noted that the post-loss estimate submitted by Azzato "was made to look like an actual receipt provided to him by the store on the date that he originally purchased the appliances***." Thus, the form, in addition to the content of Azzato's submitted proof of loss, evinced his intent to deceive the Defendant.
With respect to the claim by Azzato's wife, Williamson, the Court found that Azzato's wrongdoing did not automatically vitiate her rights under the policy. The concealment fraud provision of the policy did not apply to Williamson in the absence of proof that she participated in, or had knowledge of, Azzato's fraudulent actions.
Nevertheless, the Appellate Division found that Williamson had no insurable interest in the damaged dwelling. The policy contained an insurable interest clause which stated that the insurer "will not pay for more than an insured person's insurable interest in the property." The Court found the insurable interest provision to be unambiguous. The Court noted that the term "insurable interest" is defined by Insurance Law §3401 to include "any lawful and substantial economic interest in the safety or preservation of property from loss, destruction or pecuniary damage***."
Plaintiffs contended that Williamson contributed to the purchase of Azzato's share of the property, that she helped to maintain it and that she furnished portions of the dwelling with personal property. The Court found that this was insufficient to support a finding of an insurable interest for Williamson, and noted that it was not alleged that she earned any income from the property, or had a legal or equitable right to reside in the property. However, the Court found that she did have an insurable interest with respect to any personal property which she had furnished for the dwelling.
This is an example of the application of the insurable interest doctrine to a property loss. While an insurable interest does not require a legal or equitable interest in the property, the interest must be such that the destruction of the insured property will have a direct, and not a remote effect upon the interest.