On appeal from Superior Court, Law Division, Bergen County.
Petrella, Shebell and Gruccio. The opinion of the court was delivered by Petrella, P.J.A.D.
Plaintiff George E. Longobardi, Jr. appeals from a judgment dismissing his complaint based upon the jury's answers to special interrogatories. He had sought recovery under the terms of his insurance policy for losses of certain items of personal property stolen in a burglary. Defendants Chubb Insurance Company of New Jersey (Chubb) and Federal Insurance Company (Federal)*fn1 had denied coverage, contending that Longobardi had participated in the loss and gave false information on subjects material to the investigation during its consideration of the claim. The jury found that there were no false statements in the application and no participation by Longobardi in causing the loss. However, it found that he had made "material" false statements in the post-loss examination under oath. The complaint was dismissed and Longobardi appealed. Defendants cross-appealed certain rulings of the trial judge.
On this appeal, Longobardi's main argument is that one of the special interrogatories, number six, was erroneous because it permitted the jury to conclude that his obligation after the loss was controlled by the insurance company's subjective interpretation of "false swearing," rather than the provisions of the insurance policy and the applicable law. Longobardi also argues that his admittedly false statements after the loss were immaterial as a matter of law and that the question should not have been submitted to the jury. In addition, he argues that the judge should have instructed the jury that Chubb had the burden of proving that his statement in the examination under
oath was made with intent to defraud the insurer in the loss claim. He asserts that failure to do so was plain error, and that this is particularly so where Chubb had not proven that a fraud was committed in the loss claim, and where it had not shown that it was prejudiced by any subsequent false statement. Finally, Longobardi argues that the challenged interrogatory was inconsistent with the judge's instructions to the jury, since it failed to address the critical elements of fraud in the loss claim or reliance on his subsequent false statements with resultant prejudice.
On its cross-appeal defendants argue that the trial judge committed reversible error by refusing to allow Chubb's underwriter, Annette Paolino, to testify about what action she would have taken had she obtained information from Longobardi's prior insurance company relating to his attempt to insure with that company. They also argue that this error was compounded when the judge did not charge the jury that the misrepresentations contained in the policy application were material as a matter of law. Defendants contend that the judge also erred by refusing to admit into evidence two letters purporting to establish "cancellation" of prior insurance coverage. They further contend that the judge erred by precluding full development of their insurance fraud conspiracy theory and by refusing to allow evidence allegedly implicating Longobardi. Finally, they claim that evidence of Longobardi's teaching attendance record at Ramapo High School for June 1982 was improperly allowed.
In August 1982 Chubb issued a renter's or tenant's policy, including a personal articles floater ("P.A.F."), with coverage for antiques, fine art, and a Hummel collection owned by Longobardi. The loss came as a result of a burglary at Longobardi's rented home between April 6 and April 10, 1984 while he was out of town. At trial Longobardi testified that he was 46 years old, had 25 years of experience as a high school English teacher, and was currently employed at a senior high school in Spring Valley, New York, where he had been teaching
for about 18 years. He and members of his immediate family had been collecting fine art objects and collectibles for many years, such as antique furnishings, Hummels, paintings, jewelry and fine rugs.
Longobardi had been living in West Nyack, New York, where he had attempted to obtain renter's insurance for his collection with two insurance companies. Aetna Insurance Company (Aetna) had issued a policy to him with regular coverage, and additional coverage for his men's jewelry. Thereafter, by an April 6, 1982 letter, Aetna declined to continue coverage "due to the type of property and the high value."*fn2 Longobardi then tried to place insurance through a local agent for St. Paul Insurance Company (St. Paul). He showed the Aetna cancellation letter to the agent who then applied for coverage with St. Paul. Longobardi also obtained appraisals for his furnishings, fine art, and some major pieces of his men's jewelry.
St. Paul issued a general policy and a P.A.F. covering only the men's jewelry, not the fine art objects. Longobardi then applied for coverage for his fine art objects. His application was accepted. However, St. Paul notified Longobardi that it would not continue coverage unless he installed a burglar alarm system in the house and obtained locked cabinets for all of his valuable possessions. According to Longobardi, the cost of installing the burglar alarm system (reportedly $3,500) and purchasing locking cabinets was too expensive, especially since he was living in a rented house. As a result, St. Paul refused to provide the additional coverage. When the renewal came due the following year Longobardi decided to discontinue it because the premium had increased substantially.
Around this time, July and August 1982, Longobardi moved from West Nyack to Closter, New Jersey, where he took up residence with his brother in a rented home. About a year later Longobardi consulted Arthur Parsells of the Parsells Insurance Agency in Closter regarding renter's insurance and coverage for his household possessions, including some jewelry, fine art objects and a Hummel collection. Parsells recommended a local jeweler to appraise Longobardi's jewelry collection and a couple of other appraisers to appraise the antiques and fine art collection. For the fine art collection Longobardi did not use the recommended appraisers, but obtained an appraisal from a firm known as "Appraisal and Estate Services."
Longobardi obtained the appraisal of his jewelry collection and returned to Parsells' office on August 12, 1983. Parsells recommended Chubb's renter's insurance policy with a personal articles floater to cover the jewelry. Parsells testified that he completed the application form based on Longobardi's answers to his questions and that Longobardi's signature was not required.
According to Parsells, Longobardi answered a question regarding employment by saying he was a professor. In response to an application question about prior insurance, Longobardi apparently indicated "Allstate, Harrisburg, Pennsylvania." Questions asking if he had been refused homeowner's or P.A.F. coverage within the last three years, or if coverage had been declined, cancelled or renewal refused within the last three years were answered in the negative.
On August 23, 1983, Chubb issued a policy which provided coverage in Schedule C for personal property under "Section 1 -- Property Coverages," and separate P.A.F. coverage. In October 1983 Parsells obtained additional coverage for Longobardi's fine art collection after appraisals were received. In December 1983 the policy was amended to include Longobardi's Hummel collection. The appraisal of the Hummels was done,
as suggested by Parsells, by Longobardi using a "1983 Hummel Guide" and performing the appraisal himself.
Parsells had gone to Longobardi's home in October 1983. He described it as reminding him of a museum with its fine collection of art objects. He testified that he had never seen such an extensive collection of Hummels.
On the weekend of April 6, 1984 Longobardi went "antiquing" on a trip with his parents to New Hope, Pennsylvania. Since his brother was on a business trip no one was home that weekend. Longobardi returned to Closter on the following Tuesday afternoon and discovered that his home had been burglarized. The police responded to his call and took a statement and photographs of the premises. Longobardi also notified Parsells, who subsequently went to the house and assisted in preparing a proof of loss. Longobardi noted that some items that had been taken had not been included on the appraisal listing such as "silver, some Hummels, some porcelains, VCR tapes, TV, jewelry, coins." He testified that the total value of the loss claimed, including some items belonging to his brother, was $232,592.50.
A claims adjuster from Chubb interviewed Longobardi about a week or so later and prepared a handwritten statement of the interview. He sent this statement to Longobardi who corrected the reference to his being an English professor. He was an English teacher, and had been an assistant professor when previously employed by a college for a short time. Longobardi also corrected the reference to Allstate as his previous insurance carrier to St. Paul. The statement, which he signed, also said that he had "never made application to any insurance company other than Chubb and Son for my fine arts collection or my Hummel collection."
In August 1984 Chubb asked Longobardi to submit to an examination under oath. During that examination Longobardi [234 NJSuper Page 11] denied knowing a Stephen Kitsakos and a Frank Isgro.*fn3 At trial, however, Longobardi admitted knowing both individuals. Longobardi knew Isgro from having taught in the same school with him for a number of years. Although not good friends, their friendship arose because Isgro was also interested in fine art. He had been introduced to Kitsakos by Isgro in or about 1980, and had been in Kitsakos' presence about four or five times. Kitsakos had done appraisals for him in 1982, when he lived in West Nyack. Longobardi had also purchased some fine art objects from Kitsakos. However, those items had not been stolen in the Closter burglary. Longobardi conceded that Kitsakos had come to his house and appraised some jewelry for him in 1982 when Longobardi lived in West Nyack and that these appraisals were used to obtain insurance from St. Paul. He subsequently picked up that appraisal at Isgro's home in Hasbrouck Heights where he met Kitsakos and Isgro and stayed for about 15 to 20 minutes to discuss the appraisal with Kitsakos. He used Kitsakos' appraisal of his Hummel collection to obtain additional coverage from St. Paul, although it was ultimately declined because he would not install a burglar alarm system. Longobardi also testified that he had purchased art objects from Kitsakos at Isgro's Pennsylvania home. He denied knowing that Isgro also did appraisals and denied giving them character references attesting to their reputation as appraisers, although his signature appeared on such references. Defense counsel read into evidence Longobardi's certification acknowledging that he had filled out a character reference form for Isgro because they taught at the same school, but stating that he had not given a reference for Kitsakos, who may have forged plaintiff's signature on another form.*fn4
Cross-examination disclosed some inconsistencies between the Hummels identified on the 1982 appraisal list prepared by Kitsakos and the Hummels that Longobardi said he owned at the examination under oath. Longobardi conceded that his statement at his examination under oath that he had never attempted to have his Hummel collection insured was not correct.
On further cross-examination Longobardi said that he had denied knowing Kitsakos in the examination under oath because he felt the examination had a "hidden agenda" and was "extremely accusatory." By that time (August 1984) he knew Kitsakos and his friends were "shady" and he did not want to be associated with them. He began "distancing" himself from them in 1982 because he had heard conversations among teachers at the school where he taught to the effect that they were involved in a number of insurance claims. He stated that he did not know what they were involved in until he subsequently received newspaper articles from the lawyer for defendants. He said he obtained new appraisals when he applied for insurance through Chubb because Kitsakos' appraisals seemed high.
On cross-examination by defense counsel, Parsells, the insurance agent, was asked what he would have done if he had been told, at the time Longobardi was applying for insurance, that coverage had been refused or cancelled within the last three years. Parsells answered that he could not have bound the coverage but would have had to call Chubb to discuss the situation or simply refuse coverage. He also said that if he had been told of the prior declining of coverage, and had seen the letter from Aetna this would have caused him to have reservations and he would have contacted Aetna about the specifics of the refusal. Coverage, however, would not have been rejected,
but he would have sent the letter along with the application to Chubb. As to the refusal of St. Paul to provide coverage without a burglar alarm system, Parsells testified that although he would have answered questions on the application differently, he would not have had to discuss this with Chubb since it did not require such a system.
Chubb presented Randall Quirk's testimony that in 1979 or 1980 he had lived in an apartment above Isgro in Hasbrouck Heights. Quirk subsequently became involved in an insurance fraud scheme with Kitsakos and Isgro. Quirk testified to his own involvement with Kitsakos and Isgro and his subsequent testimony against them under a plea agreement with the United States Attorney. Quirk never implicated Longobardi in any conspiracy and admitted that the first time he heard about the burglary at Longobardi's residence was in June 1987 when the insurance company told him about it during its investigation. Quirk claimed that he last saw Longobardi with Kitsakos or Isgro in June 1982 when they all were in a car when Quirk was going to see his attorney. After that he left New Jersey and did not return until this trial. Attempts by defense counsel to establish Longobardi's involvement in a conspiracy were rejected by the trial judge because there was no evidence of Longobardi being implicated. The judge limited Quirk's testimony to his personal knowledge of Longobardi and would not allow the witness to surmise from an association between Longobardi and others.
Annette Paolino, a supervisor in Chubb's underwriting department, testified that the purpose of the question relating to prior refusal of coverage to an applicant is to give Chubb the opportunity to find out about coverage unacceptable to another insurance company since insurance companies generally have the same standards for these types of policies. If potential coverage is unacceptable to one company it is generally unacceptable to another. She stated that if she knew that Longobardi had been refused coverage she would have contacted
Parsells and any named insurance company directly to further investigate.
There was also testimony by Beverly Ascolese, a special claims investigator for Chubb, who reviewed the handwritten statement prepared by Chubb's claims adjuster. Ascolese saw a discrepancy between the correction made to the statement that St. Paul had been his prior insurance company, and the reference to Allstate in the insurance application. She then contacted St. Paul which subsequently sent her appraisals submitted by Longobardi which had been prepared by Kitsakos. When Ascolese compared those appraisals with those submitted by Longobardi to Chubb she found that some of the property did not match. Specifically, she noted that the Kitsakos appraisals listed 138 Hummels while the appraisals submitted to Chubb listed only 52 or 53 Hummels. According to her, this was not consistent with Longobardi's statement that he was a collector and not a dealer since she would have anticipated that the number of Hummels would have stayed substantially the same if he was a collector. Other testimony was proffered concerning discrepancies between Kitsakos' appraisal list and the one submitted to Chubb. This testimony was essentially limited to the issue of the credibility of the handwritten statement submitted to Chubb.
Ascolese also testified that statements at Longobardi's examination under oath that he had never been refused, cancelled or non-renewed; had never had his fine art or Hummels appraised before; had never applied for insurance for those items before; and didn't know Kitsakos or Isgro (all of which were false statements) were material to her investigation.
In rebuttal, Longobardi testified that he did not know, and never met Quirk. He denied being in a car when Quirk went to retain an attorney in June 1982. He also testified that Kitsakos had not appraised all of his Hummels or fine art in 1982, and that some of the art objects were in storage at that time. Although on cross-examination Longobardi indicated that he
had not appraised all his Hummels when he applied for insurance with Chubb, in his examination under oath he did state that for purposes of obtaining the Chubb insurance he had appraised all the Hummels he had owned at that time.
In his instructions to the jury the trial judge defined the word material as "simply" meaning "pertinent or germane." He also referred to it as "being connected to, focusing upon . . ." He gave the following instruction to the jury regarding the insurance company's affirmative defense of false swearing in the post-loss examination and written statement:
First of all, with regard to false swearing, there are three elements which compose that offense. First, an untruthful utterance; secondly; of a material fact; and (3) with the intent to cheat or deceive the insurance company.
Now, in this case, the defendant contends that the plaintiff in the course of the examination under oath conducted by the defendant with the plaintiff following the incident of April 10, 1984, uttered certain untruthful answers to questions posed in the the course of that examination. Defendant further contends that with respect to a written statement furnished by plaintiff to defendant following a claim of loss, that the plaintiff again made certain untruthful statements, utterances, in that statement. It is the contention of the defendant that either some or all of the untruthful utterances of the plaintiff were material, and that those material misrepresentations were made in an effort to hinder, deflect or mislead the insurance company in the course of its investigative process.
If you find that the statements made by the plaintiff were extraneous or irrelevant to the defendants investigative process, then the fact that the plaintiff may have made some misstatements would not permit the defendant to avoid its obligation.
On the other hand, if you find that the statements made by the plaintiff in the course of the examination under oath and/or the written statement furnished by him to the defendant contained untruthful utterances which misled, hindered or deflected the ability of the insurance company to conduct its investigative process into the loss claim which was pursued by plaintiff, then you would have found that the plaintiff had in fact committed false swearing based upon the events that have occurred in this matter.
In other words, the application for a claim of loss predicated upon that set of facts, you could conclude from that that the plaintiff intended to cheat or deceive the defendant insurance company.
It is for you and you alone to decide and to determine the answer to that question.
The special interrogatories submitted to the jury, and its responses, follow:
1. Did a burglary occur at the premises rented by plaintiff George Longobardi, Jr. located at # 83 Hickory Lane, Closter, New Jersey on April 10, 1984?
NOTE: If you have answered question # 1 "YES" answer question # 2. If you have answered question # 1 "NO" cease your deliberations and return your verdict.
2. Did plaintiff George Longobardi, Jr. conspire with another or others to defraud defendant Federal Insurance Company by causing or consenting to a burglary of his rented dwelling home located at # 83 Hickory Lane, Closter, New Jersey on April 10, 1984?