JMM Properties v. Erie Insurance

U.S. DISTRICT COURT
NORTHERN DISTRICT OF NEW YORK
Insurance Law

New York Law Journal

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Judge Glenn Suddaby

Truman was one of JMM's principals. Erie insured a JMM property for $4.26 million, and $4.4 million in builder's risk. A fire caused $4.26 million in damages and $87,551 in "builder's risk" damages. Truman was charged with arson, insurance fraud, conspiracy and other felonies related to the fire. Erie denied JMM's claim. A state appeals court upheld a ruling that Truman's refusal to submit to examination under oath breached the policy. In May 2010, Truman was found guilty under a federal indictment charging aiding and abetting arson, insurance fraud, and use of fire in a felony's commission. The Second Circuit vacated the district court's judgment of acquittal, and instructed the conviction's reinstatement. District court granted Erie summary judgment dismissing JMM's suit seeking $4.26 million on claims that Erie breached the policy. Analyzing JMM's operating agreement, it determined that as the party dealing with Truman when filing JMM's insurance claim, Erie lacked knowledge the claim was made fraudulently and without JMM's authority. Thus, Truman had authority to, and did, bind JMM when he filed the fraudulent claim. Further, Truman's criminal acts constituted breach of the policy, and were imputed to JMM.

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