80 A.D.2d 471 | N.Y. App. Div. | 1981
OPINION OF THE COURT
Plaintiffs are lessees and sole occupants of premises located in Cheektowaga, New York and owned by defendant, Buffalo Associates. In early December, 1977 the premises were destroyed by fire of suspicious origin. Plaintiffs sought indemnification for the loss from defendants, their insur
There should be a reversal. The corporations’ noncompliance with the terms and conditions of the policy is unexcused and precludes them from recovery on the insurance contract.
By way of background, the principals in both corporate plaintiffs, Richard Bergman and Nicholas Shosho, have been associated in several business ventures over the years. Before the fire, they formed plaintiff D & N Energy, Inc., to sell wood stoves. Bergman was named president and Shosho vice-president and each owned 50 % of the corporate stock. They held similar offices in plaintiff Dyno-Bite, Inc., which operated the Port Shark Discotheque. A third associate, Donald Parrino, was secretary-treasurer of Dyno-Bite, Inc., and the three men owned equal shares of its corporate stock. Parrino was an interior decorator by occupation. He had no prior business association with Bergman or Shosho but had acquired his one-third interest in Dyno-Bite, Inc., without contributing any cash to the enterprise in exchange for his services in decorating the discotheque.
Bergman has been charged with arson in connection with the fire.
On May 4, 1978 defendants served a notice on plaintiffs, Bergman, Shosho and Parrino, requesting them to appear and be examined on plaintiffs’ insurance claims.
A fire insurance policy is nothing more than a contract by the insurer to indemnify the insured against a property loss which it has sustained. Fire policies almost universally require, as a condition precedent to performance of the promise to indemnify, that the insured co-operate with the insurer in the investigation of the fire. The failure of an insured to do so is a material breach of the contract and a defense to a suit on the policy (Hallas v North Riv. Ins. Co. of N. Y., 279 App Div 15, affd 304 NY 671; Lentini Bros. Moving & Stor. Co. v New York Prop. Ins. Underwriting Assn., 76 AD2d 759,761, affd 53 NY2d 835; Catalogue Serv. of Westchester v Insurance Co. of North Amer., 74 AD2d 837; Pogo Holding Corp. v New York Prop. Ins. Underwriting Assn., 73 AD2d 605). The reason for including a co-operation clause in the policy and for conducting examinations pursuant to it is obvious enough. The company is entitled to obtain, promptly and while the information is still fresh, “all knowledge, and all information as to other sources and means of knowledge, in regard to the facts, material to their rights, to enable them to decide upon their obligations, and to protect them against false claims. And every interrogatory that [is] relevant and pertinent in such an examination [is] material, in the sense that a true answer
Plaintiffs have suggested a variety of reasons why the failure of Bergman and Shosho to testify should not prejudice their rights in this case.
First, plaintiffs assert that they have complied with defendants’ demand because some of their officers have testified and agree to testify further at a later date. They analyze the duty to co-operate much the same as the legal obligation to submit to discovery under the CPLR Thus, they maintain that corporate promises to co-operate have been kept and their obligations under the policies have been satisfied because plaintiffs have submitted the only officers willing to testify. The right to examine under the co-operation clause of the insurance policy, however, is much broader than the right of discovery under the CPLR. By its terms, the insured promises to render full and prompt assistance to discover the facts surrounding the loss and anything less results in a breach of contract. Plaintiffs’ obligation of co-operation is not met by Shosho’s partial testimony (see Pogo Holding Corp. v New York Prop. Ins. Underwriting Assn., 73 AD2d 605, supra), or by promises of evidence to be supplied in some indefinite future when the criminal proceedings are concluded (see Lentini Bros. Moving & Stor. Co. v New York Prop. Ins. Underwriting Assn., 76 AD2d 759, 761, affd 53 NY2d 835, supra).
Plaintiffs point out that the refusal of Bergman and Shosho to testify was based on constitutional grounds. It has been held that an individual may not refuse to be exaim ined on Fifth Amendment grounds without voiding his fire insurance (Gross v United States Fire Ins. Co., 71 Misc 2d 815; Restina v Aetna Cas. & Sur. Co., 61 Misc 2d 574; Kisting v Westchester Fire Ins. Co., 290 F Supp 141, affd 416 F2d 967, supra; see, also, Hudson Tire Mart v Aetna Cas. & Sur. Co., 518 F2d 671, supra). A corporation, of course, has no right against self incrimination (see United States v White, 322 US 694; Wilson v United States, 221 US 361), but a similar rule applies when the individual is a corporate officer testifying as an agent of his employer (see Kisting v Westchester Fire Ins. Co., supra). Plaintiff corporations, having selected Bergman and Shosho as their agents, are bound by the agents’ failure to testify on behalf of the corporation even though their refusal to do so was predicated on personal rights against self incrimination.
We agree with plaintiffs that an insurer seeking to avoid payment because of non-co-operation must satisfy a heavy
The order should be reversed, defendants’ motion granted and complaint dismissed.
Card amone, J. P., Hancock, Jr., Denman and Schnepp, JJ., concur.
Order unanimously reversed, without costs, motion granted and complaint dismissed.
. The co-operation clause of the policy provided in language similar to the statutory standard fire insurance policy that the insureds agreed to render (n. contd.y