MAY 2018 BAD FAITH CASES: POLICY VOID FOR INSURANCE FRAUD, AND DAMAGES FOR VIOLATION OF INSURANCE FRAUD ACT (Philadelphia Federal)
After a fire destroyed a property, the insured submitted a claim. Alleging fraud, the insurer sought summary judgment voiding the policy ab initio, and to obtain damages under Pennsylvania’s Insurance Fraud Act, 18 Pa.C.S. § 4117.
The insurer alleged that the insured procured a fraudulent lease solely to obtain insurance on the property. The insurer moved for summary judgment seeking: (1) a judgment declaring the policy void ab initio; (2) a judgment declaring that the insured made fraudulent material misrepresentations; and (3) that the insured is liable for insurance fraud. No opposition was filed, but under the federal rules, the court must still weigh the motion’s merits.
The court found the following facts: (1) that the lease was obtained fraudulently as the insured believed the property would never be occupied by the future tenant, who was the insured’s colleague; (2) that the misrepresentation was material to the insurer’s risk of insuring the property; and (3) that the insured made additional misrepresentations in pursuit of his claim against insurer, alleging entitlement to lost rents.
The court granted the insurer’s motion in its entirety, finding the policy void ab initio and holding the insured liable under the Pennsylvania Insurance Fraud Statute.