In Masaitis v. Allstate, 2014 N.J. Super. Unpub. LEXIS 2100 (App. Div. Aug. 26, 2014), the plaintiffs Marilyn and William Masaitis appealed from a jury verdict that they were not entitled to compensation from their homeowner’s insurance carrier, Allstate New Jersey Insurance co., for loss of property due to a fire. Allstate disclaimed coverage on grounds of fraud and concealment but never returned the plaintiff’s insurance premiums. The plaintiffs claimed that Allstate should have been estopped from denying the claim because it never refunded their premiums.
The plaintiffs’ home was damaged by a fire. The municipal fire marshall was unable to determine the cause of the fire, nor did the county prosecutor’s office attribute the cause of the fire to arson. Nevertheless, based upon circumstantial evidence, at the trial, Allstate argued that the plaintiffs had committed arson.
Allstate also contended that the plaintiffs made false claims to Allstate for the loss of personal property. Allstate was able to prove that items of loss were fraudulent. As an example, plaintiffs claimed the loss of 2 Rolex watches valued at a total of $70,000 but they were not able to prove they ever owned such watches.
The plaintiffs argued that Allstate should have been estopped from denying their claim because it did not refund their insurance premiums although it claimed that the policy was void because of their alleged fraud. However, the Appellate Division held that the law that the insurer could elect to either rescind the insurance policy and return the premium or to affirm the policy and abide by its terms, only applied to circumstances where the insurance policy was obtained by fraud at its inception.
Here Allstate did not claim fraud at its inception. Rather, it claimed that the plaintiffs made a fraudulent claim on their policy. Thus, such a defense did not require Allstate to rescind the policy. Hence, the Appellate Division found that Allstate was not estopped from pursuing its defenses and counterclaim.
