Astoria Quality Drugs, Inc. v. United Pacific Insurance

Judgment, Supreme Court, New York County (Myriam Altman, J.), entered on April 18, 1989, which, upon a jury verdict, awarded plaintiff $185,044 plus interest, costs and disbursements, reversed, on the law, defendant’s second and third affirmative defenses reinstated, and the matter remanded for further proceedings consistent herewith, without costs. 83 Plaintiff insured, Astoria Quality Drugs, Inc. (Astoria), brought an action against defendant insurer, United Pacific Insurance Company of New York (United), seeking to recover for personal property loss and business interruption loss caused by a fire at Astoria’s store on December 19, 1985. Because, as United correctly contends, the IAS court, by an intermediate order entered October 28, 1988, erroneously dismissed its second and third affirmative defenses, a new trial is required. (CPLR 5501 [a] [1].) These defenses, fraud in Astoria’s proof of loss and false swearing in the examination under oath, respectively, were, in our view, properly raised. We do not agree with the dissenter, who would hold that the policy provision dealing with misrepresentation deals solely with misrepresentations made in connection with the issuance of the policy, i.e., fraud in the inducement before the loss and thus not with misrepresentations made after the loss. In declining to affirm, we note that as a matter of public policy, an insured should not be permitted to recover as a result of fraudulent conduct, which said conduct may also constitute a crime. (See, Penal Law arts 176 [regarding insurance fraud], 210 [regarding perjury and related offenses].) Even an ambiguous clause should not be read to allow for criminal conduct; in this regard, we depart from the rationale of the Second Department (Fiore v State Farm Fire & Cas. Co., 135 AD2d 602, 603 [2d Dept 1987]) and the Fourth Department (North Riv. Ins. Co. v Good Morning Farms, 105 AD2d 1095, 1096 [4th Dept 1984]). Concur—Murphy, P. J., Carro and Smith, JJ.