Mali v. Federal Insurance Co., 720 F.3d 387

Malis owned property in Winsted, Connecticut, including a barn converted for use as a residence.
On April 1, 2005, the barn was destroyed by fire and the barn and its contents were insured by Federal Insurance.
The policy contained a fraud/misrepresentation clause denying recovery for fraudulent claims.
Federal demanded discovery from the Malis, including names of household help and interior photographs of the barn, which the Malis did not provide.
The Malis later increased their loss estimate and presented a detailed layout and photographs through Helaine Fendelman, an antiques appraiser.
The district court allowed an adverse-inference-style jury instruction regarding an undisclosed photograph of the upstairs of the barn; the jury found for Federal on the claim and for fraud/disclaimer of coverage.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the adverse-inference instruction was proper as circumstantial evidence rather than a sanction	Malis argue the instruction was a punitive sanction requiring stricter predicate findings.	Federal contends the instruction was a permissible explanation of circumstantial evidence and not a punishment.	Permissible as a circumstantial-evidence explanation, not a sanction.
Whether Federal was entitled to attorney fees	Malis contend the American rule forbids shifting fees absent bad faith or colorless claims.	Federal seeks fee shifting for bad-faith conduct; district court rejected, and appeal fails.	Attorney fees not awarded; district court did not abuse discretion.
Whether Federal was entitled to equitable relief to recover payments	Malis argue no timely counterclaim and policy accrual did not justify restitution.	Federal seeks restitution based on post-verdict misrepresentation finding.	Equitable relief denied; counterclaim not timely or properly pled; no abuse of discretion.

Residential Funding Corp. v. DeGeorge Financial Corp., 306 F.3d 99 (2d Cir. 2002) (distinguishes sanctions vs. circumstantial-evidence instructions; need findings for sanctions)
United States v. Amuso, 21 F.3d 1251 (2d Cir. 1994) (illustrates permissive inference concepts in jury instructions)
County Court of Ulster County v. Allen, 442 U.S. 140 (1979) (permissive inference in criminal context; informs jury discretion)
Polizos v. Nationwide Mut. Ins. Co., 255 Conn. 601 (2001) (accrual for claims; early action to recover funds permissible)
Baker v. Gold Seal Liquors, Inc., 417 U.S. 467 (1974) (Rule 13(a) and waiver implications for counterclaims)
Eisemann v. Greene, 204 F.3d 393 (2d Cir. 2000) (bad-faith standards for fee shifting; narrow exceptions)
Sierra Club v. U.S. Army Corps of Eng’rs, 776 F.2d 383 (2d Cir. 1985) (American Rule and exceptions context for attorney fees)