Litigation Only Because Mortgagee Failed to Confirm Existence of Insurance

Premature Motion for Summary Judgment Fails

It is essential that when a contract requires a person who buys a property must insure against fire must be careful to confirm that the buyer actually maintains a policy.  When the parties to a contract requiring one party insure the property that is the security for a loan fail to confirm the existence of the insurance exists. Failure to do so results in unnecessary litigation to attempt to cure the error.

In Imrie v. Ratto, — N.Y.S.3d —-, 2016 N.Y. Slip Op. 08907, 2016 WL 7469572, Supreme Court, Appellate Division, Third Department, New York (Dec. 29, 2016) the Appellate Division was asked to save a seller from his error by reversing a premature motion for summary judgment.


Defendant Andrew R. Ratto bought an auto repair business and garage in January 2010 from plaintiff by securing two mortgages on the property. The mortgages required Ratto to maintain insurance for, among other things, any “loss by fire” and to name plaintiff as the mortgagee on the insurance policy. After Ratto began making payments late and plaintiff learned that Ratto was facing a tax foreclosure, plaintiff sued Ratto to foreclose the mortgage. Suspiciously, a week later, the repair business and garage was destroyed by a fire. After the fire, plaintiff learned that, contrary to the terms of the mortgages, Ratto did not have fire insurance coverage, let alone insurance coverage that named plaintiff as the mortgagee on the insurance policy. However, a third-party-Ratto Restorations, Inc. (hereinafter the corporation)-insured the property against fire loss with defendant Erie Insurance Company. Plaintiff was not listed as the mortgagee or otherwise referenced on the corporation’s insurance policy.

In September 2013, pursuant to an amended complaint, plaintiff added Erie as a defendant by seeking a declaratory judgment determining that Erie was either “legally and equitably indebted” to him for the proceeds of the insurance policy, that the policy should be reformed to add him as the loss payee or that he had an equitable lien on any insurance payments. During discovery, Erie had the opportunity to depose plaintiff.

Nine months after plaintiff had submitted discovery demands, interrogatories and notices of depositions, and without having received any substantive response from Erie regarding the execution of the insurance policy, Erie moved for summary judgment dismissing the complaint. Plaintiff opposed the motion on grounds that included outstanding discovery requests and also moved to amend the complaint to add the corporation as a defendant and to compel discovery against Ratto and Erie. The trial court granted Erie’s motion for summary judgment and denied plaintiff’s motion to amend the complaint and compel discovery from Erie. Plaintiff appeals from that order.

In July 2015, Ratto and the corporation assigned their rights in the insurance policy to plaintiff, and plaintiff, thereafter, sued Erie as the assignee of the corporation.


The appellate court concluded that Erie’s motion for summary judgment should have been denied as premature. A summary judgment motion is properly denied as premature when the non-moving party has not been given reasonable time and opportunity to conduct discovery relative to pertinent evidence that is within the exclusive knowledge of the movant or a codefendant. A party seeking reformation of a contract must establish, by clear and convincing evidence, either that the writing at issue was executed under mutual mistake or that there was a fraudulently induced unilateral mistake.

The importance of documents and depositions that plaintiff sought but had not been provided is readily apparent. The premise of plaintiff’s cause of action is that, in executing the relevant insurance policy, the corporation and Erie both intended to include plaintiff as a loss payee but that, by mutual mistake, he was omitted.

Erie had exclusive knowledge of its understanding of the intended coverage and any intended loss payees at the time of the execution of the relevant insurance policy. Moreover, it is likely to be in exclusive possession of any collateral documents memorializing the intended scope of the relevant insurance policy. Further, plaintiff’s contention that Erie has exclusive possession of employees and materials that could shed light on its intent as to the insurance policy is patently reasonable and not merely speculation. Under such circumstances, Erie’s motion for summary judgment should have been denied without prejudice as premature.

The corporation assigned its interest in the insurance policy to plaintiff. Thus, the issue as to whether the corporation could have been inequitably affected by a judgment prior to that assignment is rendered moot by the fact that the corporation no longer has an interest in the insurance policy.

By reversing the trial court’s grant of the motion of defendant Erie Insurance Company Erie must respond completely to the discovery presented by Plaintiff and the case must go to trial or resolved by a motion for summary judgment after discovery is complete.


The plaintiff, Mr. Imrie, failed to properly protect himself by not confirming that the requirement that Ratto insure the property and name Imrie as a mortgagee could have been resolved by requiring Ratto to provide Imrie a copy of the fire insurance policy naming Imrie as a mortgagee. Because of his failure he needed an assignment of the corporation’s policy and attempt to reform the contract. A great deal of work and legal expense because of his failure to confirm that the insurance required by the mortgage existed.

ZALMA-INS-CONSULT                      © 2017 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant and expert witness specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 49 years in the insurance business.

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About Barry Zalma

An insurance coverage and claims handling author, consultant and expert witness with more than 48 years of practical and court room experience.
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