Small Fraud – Big Fraud – Any Fraud Eliminates Coverage

Failure of Insured to Deal Fairly With Insurer Eliminates Coverage

New York appellate courts are noted for their concise opinions. In Otsego Mutual Fire Insurance Company v. Sally Dinerman, et al., Tower Insurance Company of New York, et al., 158600/15, 6408, 6407, 2018 NY Slip Op 03101, Appellate Division of the Supreme Court of the State of New York (May 1, 2018) the Appellate Division of the Supreme Court took a complex insurance fraud situation and disposed of it with alacrity and clarity.


The trial court granted plaintiff’s motion for summary judgment declaring that defendant Sally Dinerman violated the “Misrepresentation, Concealment or Fraud” condition of the homeowners’ insurance policy issued by plaintiff, rendering the policy void in its entirety as to her and, other than as to fire insurance coverage, as to her husband, defendant Ira Dinerman.  The trial court also declared that Ira Dinerman’s failure to file a timely proof of loss is an absolute defense to his claim for fire insurance coverage; declaring that plaintiff has no obligation to defend or indemnify Sally Dinerman or Ira Dinerman under the policy in connection with pending or future subrogation actions; and awarding plaintiff a sum of money as against Sally Dinerman; and denied Ira Dinerman’s motion for summary judgment, for leave to amend his answer, and to reform the policy, except to make it comply with Insurance Law § 3404(e).

Plaintiff established prima facie that defendant Sally Dinerman (Sally) violated the misrepresentation, fraud and concealment provision of the homeowner’s insurance policy it issued to her, that her violation was willful and intentional, and that, accordingly, the policy was properly voided as to her and she is liable to plaintiff for amounts paid thereunder.

Sally argued that any misrepresentations were not material given the de minimus amount at issue. However, that she managed to defraud plaintiff of only a relatively small amount of money before her wrongful conduct came to light does not lend itself to the conclusion that she otherwise intended to stop submitting receipts for “reimbursement” of living expenses that she did not incur.


The appellate division concluded that the plaintiff should not be penalized for its diligent detection of Sally’s fraudulent scheme, whether dealing with small amounts or not.

Defendant Ira Dinerman’s (Ira) motion to reform the policy was properly determined. Under Insurance Law § 3404(e), Ira’s fire insurance coverage was not voided by his wife Sally’s fraudulent acts. However, as to liability coverage, the policy was properly enforced against him as written. Contrary to his argument, the policy is not ambiguous; its language has a definite and precise meaning, unattended by danger of misconception. He was required to submit a proof of loss in a timely fashion.

Ira’s failure to file proof of loss, either within the time specified in plaintiff’s demand or otherwise, is a complete defense to any claim for coverage. Sally’s two proofs of loss cannot be deemed to have been submitted “for the benefit of all” given her sworn statement in each that no person other than she had a right, title, claim to, or interest in the lost property or insurance proceeds and were false and fraudulent.


When an insured lies to an insurer when presenting a sworn proof of loss that insured commits both perjury and fraud. Either is sufficient to void coverage. An insured cannot, as Sally tried, claim that most of the claim is honest and the insurer’s remedy is only to save that part of her claim that is fraudulent. Insurance fraud voids coverage and one cannot commit a small fraud any more than one can be a little bit dead.

© 2018 – Barry Zalma

This article, and all of the blog posts on this site, digest and summarize cases published by courts of the various states and the United States.  The court decisions have been modified from the actual language of the court decisions, were condensed for ease of reading, and convey the opinions of the author regarding each case.

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant  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 50 years in the insurance business. He is available at and

Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.

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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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