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1140The Rogak Report: 01 May 2007 ** Insurance Fraud - "Founded Belief" **

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  • Lawrence Rogak
    May 2, 2007


      Umed Med., P.C. Denise T. Reed, Alex Ponce and Jared L. Morris v.
      State Farm Ins. Co.,
      2007 NYSlipOp 50892(U) (App Term, 2d Dept)

      In the first decision of its kind, so far as I have seen, the
      Appellate Term has relaxed the standard by which no-fault insurers
      establish their "founded belief" that a claim is fraudulent.

      In a string of earlier decisions, the Civil Courts have rejected
      insurers' allegations of fraud when the investigator's testimony has
      been based in part on unsworn statements from third parties (for
      details, see my book, ROGAK'S NEW YORK NO-FAULT LAW & PRACTICE).

      The same thing happened in the Civil Court, Queens County (Kevin
      Kerrigan, J.), when that court granted summary judgment to the
      plaintiff and rejected State Farm's proof of insurance fraud.

      State Farm's "sole issue on this appeal is whether it raised a
      triable issue of fact by proffering sufficient evidence in admissible
      form to demonstrate a 'founded belief that the alleged injuries do
      not arise out of an insured incident,' in that the automobile
      accident at issue in said third cause of action was staged."

      "Contrary to the determination of the court below," held the
      Appellate Term in a 2-1 decision, "we find that defendant's
      submission of a sworn affidavit of its special investigator was
      sufficient to demonstrate such a 'founded belief' notwithstanding the
      fact that the affidavit contained hearsay allegations."

      As further detailed in the dissenting opinion, State Farm submitted
      the affidavit of its investigator who asserted that the underlying
      insurance policy was obtained through the unauthorized use of the
      identity of Sophia Lowe-Davis. The investigator averred that Lowe-
      Davis was the victim of identity theft as "confirmed by NYPD
      Detective Reedy." No affidavits from either Detective Reedy or Lowe-
      Davis accompanied State Farm's opposition papers, "nor is there any
      explanation as to why they are not tendered." 

      The judgment in favor of plaintiff was reversed.

      Comment: This decision finally acknowledges, as I argue in my book,
      that as a practical matter it is often not possible for investigators
      to document in "admissible form" the statements and evidence they
      obtain during their investigations.  However, the standard for
      opposing summary judgment is to "raise" a triable issue of fact, not
      necessarily "prove it."  As the courts always say, on a summary
      judgment motion "issue finding" and not "issue determination" is the
      benchmark.  An investigator's sworn affidavit indicating information
      obtained from reasonably reliable sources (in this case, police
      officers), certainly strike me as enough to "raise" an issue of fact
      requiring a trial.

      Larry Rogak
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