March 10, 2014

Canarsie Chiropractic, P.C. v Auto Club Ins. Assn., AAA Mich. (2014 NY Slip Op 50377(U))


This case involved an action brought by a medical services company to recover monies for medical services provided to a New York resident injured in an automobile accident. The insurance policy at issue, obtained by the car's owner in Michigan, contained a provision that the insured vehicles were to be driven and principally garaged in Michigan. However, an investigation revealed that the insured vehicles were actually being operated as a commercial taxi/livery car service in New York, in violation of the insurance policy term requiring the vehicles to be garaged in Michigan. The main issue involved a conflict of law, as the defendant, Auto Club, argued that Michigan law applied, which allows for the retroactive voiding of an insurance policy due to fraud in procurement, whereas the plaintiff argued that New York law applied, which does not permit an insurance policy to be retroactively cancelled. The court held that Michigan law applied, as the policy was negotiated and issued in Michigan, with the insured risk primarily located in Michigan. The court also addressed the issue of the absence of a valid certificate of conformity for an out-of-state affidavit submitted by the defendant, ruling that the defect could be cured nunc pro tunc, and provided the defendant with 45 days to provide a proper certificate of conformity to grant the motion for summary judgment and dismiss the case.

Reported in New York Official Reports at Canarsie Chiropractic, P.C. v Auto Club Ins. Assn., AAA Mich. (2014 NY Slip Op 50377(U))

Canarsie Chiropractic, P.C. v Auto Club Ins. Assn., AAA Mich. (2014 NY Slip Op 50377(U)) [*1]
Canarsie Chiropractic, P.C. v Auto Club Ins. Assn., AAA Mich.
2014 NY Slip Op 50377(U) [42 Misc 3d 1236(A)]
Decided on March 10, 2014
Civil Court Of The City Of New York, Kings County
Levine, J.
Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.
This opinion is uncorrected and will not be published in the printed Official Reports.
Decided on March 10, 2014

Civil Court of the City of New York, Kings County

Canarsie Chiropractic, P.C., A/A/O HARRY BRENTON, Plaintiff,


Auto Club Insurance Association, AAA Michigan, Defendant.


Attorneys for Plaintiff:

The Rybak Firm, PLLC.

1506 Kings Highway, 2nd Fl

Brooklyn, NY 11229

Attorney for Defendant

Conway, Farrell, Curtin & Kelly, P.C

48 Wall Street

Woodbury, New York 10005

Katherine A. Levine, J.

Plaintiff Canarsie Chiropractic, P.C. (“plaintiff” or “Canarsie Chiropractic”), a medical services company, brings this action pursuant to Insurance Law § 5106(a) to recover monies for medical services provided to its assignor Harry Brenton (“assignor” or “Brenton”), a New York resident, for injuries he allegedly suffered in an automobile accident in New York. The car’s owner, Adama Ndiaye (“Ndiaye”), obtained the insurance policy for the car at issue, as well as for additional cars he owned in Michigan from Defendant Auto Club Insurance Association AAA Michigan (“Auto Club” or “defendant”). Per the policy, the cars were to be driven and principally garaged in that state. [*2]

After several vehicles that Ndiaye owned and insured with Auto Club were involved in auto accidents in New York between 2007 and 2009, the defendant initiated its investigation into Ndiaye’s place of residence. The investigation revealed that Ndiaye was in fact operating a commercial taxi/livery cab service in New York with the insured vehicles, in violation of the insurance policy term mandating that the vehicles be garaged in Michigan. cab service in New York and that all the vehicles were principally garaged in New York. Auto One thereupon obtained a default judgment from the Michigan Circuit Court, Auto Club Ins. Co. v Adama Ndiaye, C/A No: 10-758-CK (Hon. Timothy P. Connors) declaring the policy void ab initio and that plaintiff Auto One was “neither bound by, nor liable to [Ndiaye] or any other person or entity, whether known or unknown, under any contractual provision [of the policy].”

Auto Club moves for summary judgment on the ground that Michigan law applies, since the underlying no fault policy was procured and issued in Michigan to a Michigan resident. Plaintiff opposes the motion and argues that New York law applies since Auto One does business in New York. A conflict of law issue exists since Michigan law voids the policy ab initio when there is fraud in the procurement of the policy where as New York law does not permit an insurance policy to be cancelled retroactively. See, Mtr. of Allstate Ins. Co., (Stolarz), 81 NY2d 219 (1993); Jiminez v. Monadnock Constr., Inc., 109 AD3d 514 (2d Dept. 2012).

In Michigan, the various doctrines of fraud do not require the party asserting fraud to have investigated all assertions and representations made by its contracting partner as a prerequisite to establishing fraud. Titan Ins. Co. v. Hyten, 491 Mich. 547, 557 817 N.W.2d 562 (2012). Rather, the party asserting fraud has a plethora of legal and equitable remedies, including the right to “retroactively avoid contractual obligations through traditional remedies such as cancellation, rescission or reformation.” Id at 558. Therefore, Michigan has long held that an insurer can rescind a policy and declare it void ab initio as against an insured who seeks benefits when the insured procured the policy through fraud, even where the fraud was easily ascertainable. Titan Ins. Co. Supra, 491 Mich. At 555. See also Jackimowicz v. Citizens Ins. Co. of America, 2011 Mich. App. LEXIS 396 (Mich. Ct. App. 2011); Hammoud v. Metropolitan Property and Casualty Ins. Co., 222 Mich. App. 485, 488, 563 N.W.2d 716, 718 (1997).

In Titan, supra, the Michigan Supreme Court definitively ruled that an insurer could avail himself of these equitable principles to avoid liability under an insurance policy on the ground of fraud in the procurement notwithstanding that “the fraud might have been easily ascertainable…and the claimant was a third party.” 491 Mich. At 562. The Court reversed precedent which found that the public policy of the state recognizing the right to reimbursement under the no fault law trumped the common law which enabled insurers to obtain traditional forms of relief when they were victims of fraud and that third parties needed to protected. Id at 565- 569. Rather, “(t)hird-party victims of automobile accidents have a variety of means of recourse under the no-fault act (including tort actions), and it is to those means that such person [*3]must look.” Id at 565.

In New York, both the common law and the Insurance Law permit an insurance carrier to rescind and or void an insurance policy where a material misrepresentation was made at the time of the procurement of the policy. Stracar Medical Services v. Nationwide Mut. Ins. Co., 2013 NY Slip Op 50633(U), 39 Misc 3d 1216(A) (Civil Ct., Kings Co. 2013). See, Kiss Construction NY Inc. v. Rutgers Casualty Ins. Co., 61 AD3d 412 (1st Dept. 2009); Ins. Law §3105. However, VTL §313 (1) (a), which prohibits the termination of a contract of insurance until after the insurer mails a notice of termination to the insured, “supplants an insurance carrier’s common law right to cancel a contract of insurance retroactively on the grounds of fraud or misrepresentation and mandates that the cancellation of a contract pursuant to its provisions may only be effected prospectively.” Liberty Mut. Ins. Co. v. McClellan, 127 AD2d 767 (2d Dept. 1987). See, Mtr. Of Met Life Auto & Home v. Aguedelo, 8 AD3d 571, 572 (2d Dept. 2004). This section thus “places the burden on the insurer to discover any fraud before issuing the policy, or as soon as possible thereafter, and protects innocent third parties who may be injured due to the insured’s negligence.” Mtr. Of Ins. Co. v. Kaplan, 274 AD2d 293, 298 (2d Dept. 2000). However, only innocent third parties who are injured are protected and “not a health care provider who deals with the assignor-insured at its peril in accepting an assignment of the insured’s no-fault benefits.” Mtr of Met life, supra, 12 Misc 3d at 11-12.

The insurance carrier may assert as an affirmative defense that the insured misrepresentations and/or fraud in obtaining the policy precludes any recovery by the insured. A.B. Medical Services PLLC v. Commercial Mutual Ins. Co., 12 Misc 3d 8,11-12 (App. Term, 2d Dept. 2006). The defense of fraudulent procurement of an insurance policy is nonwaivable and hence exempt from the 30-day procurement rule, and may be asserted as against health care providers who seek to recover assigned benefits from the insured. AB Medical Services, supra, 12 Misc 3d at 11-12. The insurance company may also bring an action against its insured to recover any losses it incurred by paying benefits under the policy to the innocent third party. Mtr. Of Ins. Co. v. Kaplan, 274 AD2d 293, 298 (2d Dept. 2000).

Here, the assignor was an innocent third party as he was a passenger in a livery car owned by the insured and played no role in the insured’s fraudulent misrepresentation. Therefore, plaintiff health care provider, which stepped into the shoes of the assignor, is an innocent third party in the instant matter.

Traditionally, conflict of law questions relating to contracts were resolved by application of the law of the jurisdiction where the contract was made or was to be performed.” Mtr. of Eagle Ins. Co v. Singletary, 279 AD2d 56, 59 (2nd Dept. 2000). New York has long recognized the use of center of gravity or groupings of contacts as the appropriate analytical approach to choice of law questions in contract cases. Mtr of Midland Ins. Co., 16 NY3d 536 (2011) citing Zurich Ins. Co. v Shearson Lehman Hutton, 84 NY2d 309, 317, 319 (1994). This grouping of [*4]contacts approach establishes which State has the most significant relationship to the transaction and the parties, and allows that state “paramount control over the legal issues arising out of a particular factual context.” Mtr of Midland Ins. Co., supra, 16 NY3d at 543; Jiminez v. Monadnock Constr. Inc., 109 AD3d 514, 516 (2d Dept. 2013). Significant contacts include the place of contracting, negotiation and performance, the location of the subject matter of the contract, and the domicile or place of business of the contracting parties. Mtr. of Allstate Ins. Co. supra, 81 NY2d at 227; Jiminez, supra at 516; Mtr. Of Eagle Ins. Co. v. Singletary, 279 AD2d 56, 58-59 (2nd Dept. 2000).

In the context of liability insurance contracts, the courts look to the law of the state which the parties understood was to be the principal location of the insured risk. Mtr of Midland Ins. Co. supra 16 N.Y.3rdat 544; Eagle v. Singletary, supra, 279 AD3d at 59; Conflict of Laws § 193. The principle location of the insured risk will be deemed to be the state where the insured is incorporated, domiciled and has its principal place of business. Midland, supra, 16 NY2d at 544. In the case of a noncommercial vehicle insurance, the principal location of the insured risk is the place where the vehicle is to be principally garaged. Eagle Ins. Co., supra, at 57 citing Restatement [Second] of Conflict of Laws, § 193, comment c.

Applying this analytical framework to the facts, Michigan clearly had the most significant contacts. Defendant’s casualty claims representative averred that at the time Ndiaye procured the policy, he provided a Michigan address and stated that the four vehicles registered on his policy were to be garaged in that State. The subject insurance policy was negotiated in and issued to Ndiaye in Michigan and incorporated Michigan law. See, GEICO v. Nichols, 8 AD3d 564 (2d Dept. 2004) (retroactive cancellation of policy under Florida law permitted where the policy was issued in Florida to Florida residents for a vehicle registered in Florida and policy incorporated Florida law; the only connection to New York was that insured was driving car in NY at time of accident); Mtr of Eagle Ins. Co supra (retroactive cancellation of policy under Virginia law for fraudulent misrepresentation permitted where the policy was issued in Virginia to a Virginia resident for a vehicle garaged in Virginia, and the only connection to New York was that the accident occurred in NY and the injured passenger was a NY resident); Careplus Medical Supply Inc v. Selective Insurance Co of America, 25 Misc 3d 48 (App Term, 2d Dept. 2009) (New Jersey law governs where the policy was negotiated and entered into in New Jersey, the insureds lived in New Jersey, and the vehicle was garaged and registered in New Jersey; the only connection to New York was that the accident occurred there); R.E.G Flushing Medical v. Integon Nat. Ins. Co., 2011 NY Slip Op 50975(U), 31 Misc 3d 1234(A) (Dist. Ct., Nass. Co. 2011) (North Carolina law applies where policy was issued to insured in North Carolina, the policy listed a North Carolina address for the insured and the insured certified that his cars were garaged at the address listed).

Applying Michigan law, it is clear that the defendant properly cancelled the policy at issue because of fraud in its procurement. Plaintiff argues that even if Michigan Law applies, the [*5]motion cannot be granted because its out of state affidavit lacks a certificate of conformity required by RPL 299-a (1). This section mandates that an affidavit signed outside of the state by a foreign notary be accompanied by a certificate of conformity certifying that the manner in which the acknowledgment was taken conforms with New York law or other place where the acknowledgment was taken. The certificate must be made by an attorney admitted to practice in New York State who resides in the other jurisdiction, or by an attorney admitted to practice in the other jurisdiction, or any other person deemed qualified by any court of the State of New York. RPL ァ 299-a (1).

Here, the Michigan notary of the public who notarized defendant’s affidavit does not fall within any of the categories allowed by RPL 299-a (1). Nevertheless, the absence of a valid certificate of conformity for an out-of-state affidavit is not a fatal defect and can be cured nunc pro tunc. Fredette v Town of Southampton, 95 AD3d 940, 941 (2nd Dept. 2012); Art of Healing Medicine, P.C. v. Amica Mutual Ins. Co., 2013 NY Slip Op 52014(U), 41 Misc 3d 141(A) (App. Term, 2nd Dept. 2013). Accordingly, the defendant is given 45 days from receipt of this decision to provide a certificate of conformity to this Court and the other side. Upon receipt of proper certificate, this Court will grant the motion for summary judgment and dismiss the case.

This constitutes the Decision and Order of the Court.

DATED: March 10, 2014



Acting Justice, Supreme Court