On appeal from Superior Court, Law Division, Essex County.
Approved for Publication August 16, 1995
Before Judges King, D'Annunzio and Eichen. The opinion of the court was delivered by Eichen, J.s.c. (temporarily assigned)
The opinion of the court was delivered by: Eichen
The opinion of the court was delivered by EICHEN, J.S.C. (temporarily assigned)
Plaintiff Robert DiFrancisco commenced this action against his insurance company, defendant Chubb Insurance Company, seeking coverage under his homeowner's policy for loss of furnishings, clothing, and jewelry allegedly valued at $87,253. The complaint alleges these items were stolen from his single-family home in Livingston during two burglaries in March and May 1991. The Judge granted defendant's motion for summary judgment dismissing the complaint because of plaintiff's refusal to produce the income tax returns and books and records of two closely held corporations he controlled. The Judge found that by refusing to cooperate, plaintiff had breached a material condition of the policy justifying denial of coverage. The Judge did not reach the issue of plaintiff's alleged concealment or misrepresentation of facts as an alternative reason for defendant's denial of coverage although part of the basis for the motion. The Judge also denied plaintiff's cross-motion for partial summary judgment seeking to require defendant to cover the losses.
On the motion, as here, plaintiff argued that he had made a good faith effort to comply with the conditions of the policy, claiming that he had furnished all existing relevant records except the corporate records. As to these, he claimed the law was unclear as to his obligations, and, in any event, in the absence of any objective evidence to support even a reasonable suspicion that he was involved in the alleged thefts, the corporate books and records and related financial information are immaterial to defendant's right to investigate the claim. Finally, he argued that an insurer should not be permitted to exercise unbridled discretion to demand these records on penalty of forfeiture of the insured's rights under the policy.
Defendant countered that reasonable suspicion exists to support its right to demand plaintiff's full compliance with its document requests. Defendant argued that the corporate books and records are highly relevant to plaintiff's financial ability to have acquired the items claimed stolen, to his motive for participating in the fraud, and to his gross exaggeration of the magnitude of the claimed loss. Defendant also contended that an order requiring plaintiff to produce the documents during litigation as part of discovery, three years after the burglaries, comes "too late" and would dilute its right to pursue a prompt investigation of the claim under the policy. Finally, defendant argued that, as a matter of law, plaintiff's "willful breach of the policy" by his failure to produce the requested records automatically voided the claim, preventing him from seeking any legal redress in the courts as provided in the policy.
We affirm the grant of summary judgment in favor of defendant. Plaintiff's refusal to produce the corporate books and records constitutes a material breach of the policy given the substantial suspicious circumstances existing in this case. We add, however, that for future guidance, an insured who is uncertain as to whether it must comply with the document production demands of its insurer under its policy must promptly file a declaratory judgment action seeking judicial clarification of its obligations under the policy.
We now review the background of the case based on the facts obtained during defendant's investigation of the claim through "examinations under oath" and from documents plaintiff produced. In May 1990, plaintiff obtained a homeowner's insurance policy from defendant for his residence located at 224 Hobart Gap Road, Livingston. The policy was effective from May 25, 1990 through May 25, 1991 and provided for "deluxe contents coverage" in the amount of $217,000 with a $250 deductible.
The relevant provisions "explaining the conditions that apply to [the] policy" are as follows:
We do not provide coverage if you or any covered person has intentionally concealed or misrepresented any material fact relating to this policy before or after a loss.
You must prepare an inventory of damaged personal property, describing the property in full. It should show in detail the amount insured under this policy and actual amount of the loss. Attach bills, receipts, and other documents to support your inventory.
We have the right to examine under oath, as often as we may reasonably require, you, family members and other members of your household. We may also ask you to give us a signed description of the circumstances surrounding a loss and your interest in it, and to ...