When One Lies About an Insurance Claim He Will Never Prosper

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John Ruiz, proceeding pro se, sued Liberty Mutual Fire Insurance Company (“Liberty Mutual”), asserting that Liberty Mutual breached two homeowner’s insurance policies by failing to pay plaintiff’s water damage claims. Liberty Mutual asserts two counterclaims, seeking to recover money it paid to plaintiff pursuant to those policies and to investigate plaintiff’s claims. In John Ruiz v. Liberty Mutual Fire Insurance Company, No. 19 CV 4399 (VB), United States District Court, S.D. New York (February 14, 2022) the pro se plaintiff proved the old saw that he had an idiot for a client.
BACKGROUND

Plaintiff has been married to Yolanda Brooks-Ruiz (“Brooks-Ruiz”) since April 2016. Brooks-Ruiz uses the name Yolanda Brooks professionally. Plaintiff’s first marriage ended in divorce, and his ex-wife died approximately seven years after the divorce.

The parties agree that, after plaintiff and Brooks-Ruiz were married, they generally spent weekdays together at plaintiff’s apartment in East Harlem, Manhattan, along with two of plaintiff’s children. Plaintiff and his children spent weekends at plaintiff’s home at 111 Linden Place in Middletown, New York (the “Middletown Property”). Brooks-Ruiz spent weekends at a home she owned at 7609 Aquatic Drive in Arverne, New York (the “Arverne Property”), which is in the Rockaways, Queens.

Although Brooks-Ruiz regularly rented the one-bedroom residence, she had never rented the duplex out before she allegedly rented it to plaintiff.
Plaintiff’s Insurance Policies with Liberty Mutual

Liberty Mutual issued plaintiff two homeowner’s insurance policies covering the Middletown Property, from September 13, 2016, to September 13, 2018. The Policies contain the standard “Concealment or Fraud Provision.” The Policies also contain coverage for Additional Living Expenses.
Plaintiff’s Insurance Claims

Following flooding at the Middletown Property caused by a burst pipe in January 2017, plaintiff filed a claim with Liberty Mutual pursuant to the 2016 Policy. Plaintiff retained a public adjuster, Robert D’Amore, to assist him.

Among other things, plaintiff sought coverage for certain Additional Living Expenses, or “ALE.” Plaintiff made an ALE claim for rent payments he purportedly made to Brooks-Ruiz to reside with her at the Arverne Property. Pursuant to the lease agreement, Ruiz agreed to pay Brooks-Ruiz a security deposit of $1,000 and monthly rent of $4,000. The public adjuster claimed the insured paid $8,000 for February and March and now needs to pay April in a few days.

On March 31, 2017, the public adjuster emailed Liberty’s adjuster, Traas, explaining the efforts made by Ruiz to obtain a place to occupy in support of his ALE claim.

In support of his ALE claim Ruiz submitted copies of his rent checks, made out to “Yolanda Brooks, ” to Liberty Mutual for reimbursement. Following flooding at the Middletown Property caused by another burst pipe in January 2018, plaintiff made a claim with Liberty Mutual pursuant to the 2017 Policy. In connection with this second claim, plaintiff continued to reside with Brooks-Ruiz in her duplex at the Arverne Property and again sought reimbursement for rental payments made to her.
Liberty Mutual’s Investigation

As part of the investigation, Karen Kuitwaard, a senior investigator with Liberty Mutual, met with plaintiff on March 19, 2018, at the Middletown Property. Kuitwaard asked plaintiff if he was married, and plaintiff responded that he was a widower. Plaintiff never informed Liberty Mutual he was married, or married to Brooks-Ruiz, until his examination under oath (“EUO”) by Liberty Mutual on August 16, 2018. At his EUO, plaintiff admitted he was married to Brooks-Ruiz and that he previously told Kuitwaard he was a widower.

Liberty Mutual determined plaintiff violated the Concealment or Fraud Provision of the Policies and informed plaintiff it would not cover any of plaintiff’s claims relating to the Middletown Property. However, before denying plaintiff’s claims, Liberty Mutual had ultimately reimbursed plaintiff $43,943.76 in ALE related to the Arverne Property. Liberty Mutual would not have made those payments had Ruiz disclosed that Brooks-Ruiz was his wife.
DISCUSSION

A fact is material when it “might affect the outcome of the suit under the governing law.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A dispute about a material fact is genuine if there is sufficient evidence upon which a reasonable jury could return a verdict for the non-moving party. See Id. It is the moving party’s burden to establish the absence of any genuine issue of material fact. Zalaski v. Bridgeport Police Dep’t, 613 F.3d 336, 340 (2d Cir. 2010).
Breach of the Concealment or Fraud Provision

The Policies provide they are void if plaintiff “[i]ntentionally concealed or misrepresented any material fact or circumstance” or “[e]ngaged in fraudulent conduct.”

To void an insurance policy, “[t]he insurer must prove fraud by clear and convincing evidence.” Varda, Inc. v. Ins. Co., 45 F.3d 634, 639 (2d Cir. 1995). To establish fraud under New York law, the moving party “must prove a misrepresentation or a material omission of fact which was false and known to be false by the other party, made for the purpose of inducing the other party to rely upon it, justifiable reliance of the other party on the misrepresentation or material omission, and injury.” Lama Holding Co. v. Smith Barney Inc., 88 N.Y.2d 413, 421 (1996).

In the context of an insurance investigation, an insured’s misrepresentation or omission is material as a matter of law if it might have affected the attitude and action of the insurer or may be said to have been calculated either to discourage, mislead or deflect the insurer’s investigation in any area that might seem to the insurer, at that time, a relevant or productive area to investigate.

To sustain a fraud claim, the asserting party must show a causal connection between the “act of deception” and its injury.
Analysis

Liberty Mutual has demonstrated as a matter of law that plaintiff violated the Concealment or Fraud Provision. That is, it is undisputed plaintiff intentionally omitted his relationship with Brooks-Ruiz and misrepresented his connection to the Arverne Property.

If Liberty Mutual had known plaintiff was married to Brooks-Ruiz, it would not have reimbursed plaintiff for rental payments to reside with Brooks-Ruiz at the Arverne Property. In other words, it is undisputed plaintiff’s omission affected the attitude and action of Liberty Mutual in reimbursing him.
Concealment

Liberty Mutual offers conclusive evidence plaintiff never informed it that he was married to Brooks-Ruiz. Traas testified at his deposition that D’Amore never told him plaintiff was married or that the Arverne Property was owned by plaintiff’s wife. Moreover, plaintiff lied to Liberty Mutual’s investigator when she asked him about his marital status.
Misrepresentation

Liberty Mutual offered conclusive evidence plaintiff misrepresented his connection to the Arverne Property.
Reliance

Liberty Mutual has shown it reasonably relied on plaintiff’s omissions and misrepresentations as a matter of law. There is no evidence Liberty Mutual should have known from plaintiff’s ALE claim documentation that further investigation was warranted.

Liberty Mutual was not seeking to engage in a potentially risky transaction without performing due diligence, it was relying on the representations and documentation provided by plaintiff’s retained public adjuster.
Injury

Finally, it is undisputed Liberty Mutual was injured because of plaintiff’s conduct. As explained above, Liberty Mutual paid $43,943.76 in ALE it would not have covered had it known plaintiff and Brooks-Ruiz were married.

Liberty Mutual’s motion for partial summary judgment was granted and Plaintiff’s claims were dismissed.

With respect to Liberty Mutual’s counterclaims, the court ordered the parties to work toward a trial on the claim for return of the monies paid as a result of the fraud.
ZALMA OPINION

An obvious and blatant fraud was attempted by Ruiz who lied blatantly to the adjuster, investigator and at an Examination Under Oath and took money he knew, or should have known, he was not entitled to obtain under the policy. Lies in the presentation of a claim where the insurer relied on the lie to its detriment, is fraud. The trial that follows should provide a judgment to Liberty for the money it paid, interest, and the costs of its investigation and the litigation as a result of the fraud. Simultaneously the prosecutor should consider criminal charges since insurance fraud is a felony.

© 2022 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders.

He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business.

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