Lie on an Application About Primary Residence is Ground for Rescission
Post 4896
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Plaintiff Homesite Insurance Company's (Homesite) moved for Summary Judgment seeking a judicial declaration that it is entitled to rescission of Defendant Zhen Jiang's homeowners' insurance policy and enter summary judgment in its favor on Mr. Jiang's bad faith counterclaims.
In Homesite Insurance Company v. Zhen Jiang, No. CV-21-00554-TUC-JGZ, United States District Court, D. Arizona (September 16, 2024) the USDC explained an insurer's right to rescission.
INTRODUCTION
The USDC described this case as "an insurance fraud case."
Homesite asserts that Mr. Jiang misrepresented that the house located at 7617 East Snyder Road, Tucson, AZ 85750 (the Property) was his primary residence. Homesite relied on Mr. Jiang's representation in issuing the homeowners' insurance policy (the Policy); and Mr. Jiang's misrepresentation was material because Homesite does not, and would not, insure a vacant home.
Mr. Jiang owns properties in Arizona and Texas. In early 2018, Mr. Jiang bought the Property, a five-bedroom single-family residence located on four acres at 7617 East Snyder Road. The Property had been vacant since the previous owners lost the Property to foreclosure in 2014.
Mr. Jiang's Insurance Application And Policy
In November 2019, Mr. Jiang applied for homeowners' insurance for the Property. In his application, Mr. Jiang represented that the Property was his primary residence and that the information provided in the application was truthful and accurate.
Homesite warned Mr. Jiang, after accepting him as an insured, to review the Declarations page and check the description of the dwelling, and occupancy and if any of this information needs to be corrected, Jiang must advise Homesite within 30 days of receipt.
The Pima County Sheriff's March 21, 2020 Report
On March 21, 2020, the Pima County Sheriff's Department responded to a call of vandalism at the Property. Vandals had set off fireworks inside the Property, graffitied and put holes in the walls, started fires, and broke numerous windows.
Mr. Jiang's Neighbor's Statements
The March 21, 2020 call to police was made by neighbor Morgan Hay stated that the damage to the Property possibly occurred over New Years. Mr. Hay informed officers that Mr. Jiang “would show up from time to time and ask Mr. Hay to check on the house periodically; however, nobody had occupied that residence since it was foreclosed upon in 2014.” Similar responses were testified to by multiple neighbors.
Mr. Jiang's Statements Regarding Occupancy
Mr. Jiang provided numerous inconsistent statements as to when, if ever, he lived at the Property. In his Opposition, he states that he lived in the home from late 2019 until early 2020, and that the home was not vacant for more than 60 days prior to the March 21, 2020 fire.
DISCUSSION
Fraudulent misstatements, omissions, or concealment of facts can be established by proving either legal fraud or actual fraud. Legal fraud exists if the question asked in an insurance application: (1) is one where the facts are within the personal knowledge of the insured; (2) are such that the insurer would naturally have contemplated that the answers represented the actual facts; and (3) the answers are false. Legal fraud does not require an intent to deceive.
Homesite established that the Property was not Mr. Jiang's primary residence. No reasonable juror could conclude otherwise based upon the evidence that he lived elsewhere, the condition of the Property, the reports of his neighbors, and the fact that he was apparently unaware of the vandalism occurring on the Property until late October 2020.
Mr. Jiang is not credible for the additional reason that he concealed his lease at the 7th Street Apartment during discovery.
Homesite Did Not Act In Bad Faith In Investigating And Processing Mr. Jiang's Claim.
The Court will enter summary judgement in favor of Homesite on Mr. Jiang's bad faith counterclaims. The USDC concluded that Homesite is entitled to rescission of the Policy and entry of judgment on Mr. Jiang's counterclaims.
ZALMA OPINION
Insurance is a business of utmost good faith where neither party to the contract will do anything to deprive the other of the benefits of the contract. Mr. Jiang lied on his application and continued to lie as he pursed his claim. The lies were material since the insurer would never issue a homeowners policy to a vacant property, especially one that had been vacant and vandalized before he bought the property. This liar will not prosper from his fraud and the court should refer Mr. Jiang to the office of the US Attorney to prosecute him for fraud.
(c) 2024 Barry Zalma & ClaimSchool, Inc.
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Post 5219
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An Insurance claims professionals should be a person who:
Can read and understand the insurance policies issued by the insurer.
Understands the promises made by the policy.
Understand their obligation, as an insurer’s claims staff, to fulfill the promises made.
Are competent investigators.
Have empathy and recognize the difference between empathy and sympathy.
Understand medicine relating to traumatic injuries and are sufficiently versed in tort law to deal with lawyers as equals.
Understand how to repair damage to real and personal property and the value of the repairs or the property.
Understand how to negotiate a fair and reasonable settlement with the insured that is fair and reasonable to both the insured and the insurer.
How to Create Claims Professionals
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The Insurance Industry Needs to Implement Excellence in Claims Handling or Fail
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This is a change from my normal blog postings. It is my attempt. in more than one post, to explain the need for professional claims representatives who comply with the basic custom and practice of the insurance industry. This statement of my philosophy on claims handling starts with my history as a claims adjuster, insurance defense and coverage lawyer and insurance claims handling expert.
My Training to be an Insurance Claims Adjuster
When I was discharged from the US Army in 1967 I was hired as an insurance adjuster trainee by a professional and well respected insurance company. The insurer took a chance on me because I had been an Army Intelligence Investigator for my three years in the military and could use that training and experience to be a basis to become a professional insurance adjuster.
I was initially sat at a desk reading a text-book on insurance ...
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Post 5210
This is a change from my normal blog postings. It is my attempt. in more than one post, to explain the need for professional claims representatives who comply with the basic custom and practice of the insurance industry. This statement of my philosophy on claims handling starts with my history as a claims adjuster, insurance defense and coverage lawyer and insurance claims handling expert.
My Training to be an Insurance Claims Adjuster
When I was discharged from the US Army in 1967 I was hired as an insurance adjuster trainee by a professional and well respected insurance company. The insurer took a chance on me because I had been an Army Intelligence Investigator for my three years in the military and could use that training and experience to be a basis to become a professional insurance adjuster.
I was initially sat at a desk reading a text-book on insurance ...
