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March 6, 2012

Insured's Testimony Creates Question of Fact Regarding Insurer's Timely Receipt of Proof of Loss

The Appellate Division, Third Department, recently decided an appeal involving the issue of whether an insured had complied with the insurer's demand for filing of a sworn proof of loss under a fire insurance policy. Turkow vs. Security Mutual Insurance Company, 2012 N.Y. Slip. Op. 1402 (3d Dep't February 23, 2012).

Following the destruction of plaintiffs' property in Binghamton, New York on July 25, 2001, defendant insurer served a written demand for sworn proofs of loss on plaintiffs by letter dated October 1, 2001. The demand was received by plaintiff, John P. Turkow, and acknowledged on October 4, 2001.

Thereafter, on December 28, 2001, the company denied the claim upon the ground that the plaintiffs had failed to provide a sworn proof of loss within 60 days of the insurer's demand, as required by the policy and Insurance Law § 3407.

Plaintiffs brought suit under the policy, and the insurer raised an affirmative defense that the plaintiffs had failed to timely file the proof of loss. Defendant and plaintiffs thereafter moved for summary judgment. The lower court denied both motions.

On appeal, the Appellate Division, Third Department, recognized the settled rule that an insured's failure to file sworn proofs of loss within 60 days of receipt of the insurer's demand is an absolute defense in the absence of waiver or estoppel on the part of the insurer. The Court rejected the plaintiffs' claim that the defendant's adjuster's investigation of the fire claim, setting forth the extent of the fire damage, satisfied the plaintiffs' obligation to submit a proof of loss or constituted a waiver of that requirement.

However, the Court found that an issue of fact existed as to whether the insureds had timely filed the proof of loss. The insurer satisfied its initial burden on the motion by submitting a copy of its demand for proof of loss, the certified mail receipt signed by Turkow on October 4, 2001, and Turkow's examination before trial testimony acknowledging that the signature on the postal receipt was his and that he had received the proof of loss forms. The defendant also submitted an affidavit from its claims manager averring that no proof of loss forms had been received from the plaintiffs.

In opposition, plaintiffs submitted the deposition testimony and sworn affidavit of John Turkow stating that he and his brother completed the proof of loss forms and returned them to the defendant "months" before the claim was rejected on December 28, 2001. Plaintiffs also submitted a copy of a January, 2002 letter from defendant's claims supervisor memorializing a phone conversation in which the plaintiffs claimed that the proof of loss forms had been completed and returned.

The Court held that a genuine issue of fact existed with respect to the plaintiffs' compliance with the proof of loss demand, precluding summary judgment.

This case illustrates the potential difficulty in establishing that an insured has failed to comply with a demand for proof of loss. In order to avoid this result, an examination under oath, prior to rejection of the claim, should be considered to confirm when the insured received the demand for proof of loss and that she has not complied with the demand.

If you require further information regarding the information presented in this Legal Alert and its impact on your organization, please contact any of the members of the Insurance Coverage & Regulation Practice Area.

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