Goodarzian v. Aetna Cas. & Sur. Co., 28 N.Y.2d 124 (1971)
An insured’s submission of a fraudulent proof of loss to recover under an insurance policy voids the entire policy, even if the insured suffered a legitimate loss as to some of the claimed items.
Summary
Khaibar Khan Goodarzian, known as the “World’s Best Dressed Man,” filed a claim for $411,952 against his insurance companies after a fire in his lavish Fifth Avenue apartment, alleging a loss of $985,000 in clothing, furniture, jewelry, and rugs. The insurance companies contested the claim, arguing that many items listed in the proof of loss were not present in the apartment at the time of the fire. The trial court awarded Goodarzian $104,316, but the Appellate Division reversed, finding the proof of loss fraudulent. The New York Court of Appeals affirmed, holding that the fraudulent proof of loss voided the entire insurance policy.
Facts
Khaibar Khan Goodarzian, an extravagant individual, maintained a vast wardrobe in his Fifth Avenue apartment. A fire occurred in his apartment while he was out. Goodarzian claimed a loss of $985,000, including clothing, furniture, jewelry, and Persian rugs. The insurance companies alleged that the proof of loss included items not present in the apartment during the fire.
Procedural History
Goodarzian sued the insurance companies to recover the full policy amount. The trial court awarded him $104,316 for specific items. The Appellate Division reversed and dismissed the complaint, finding the proof of loss fraudulent as a matter of law. The Court of Appeals granted review.
Issue(s)
Whether the insured submitted a fraudulent proof of loss in attempting to recover for a fire loss, which, as a matter of law, voids the insurance contract.
Holding
Yes, because the evidence demonstrated that the insured included items in his proof of loss that were not present in the apartment at the time of the fire, and his explanations were unreasonable, establishing fraud.
Court’s Reasoning
The Court of Appeals relied on a standard insurance policy provision stating that the policy is void if the insured willfully conceals or misrepresents any material fact or circumstance or engages in fraud or false swearing. The court cited prior case law, including Domagalski v. Springfield Fire & Mar. Ins. Co., which held that if an insured fraudulently includes items in a proof of loss that were not possessed or places a false value on owned items, they cannot recover anything. The court acknowledged that merely failing to prove the entire claimed loss does not automatically establish fraud if there is a good faith basis for the claim. However, when the difference between the claimed loss and the proven loss is grossly disparate, and the explanation is unreasonable, fraud is presumed.
The court noted that Goodarzian claimed $64,000 in clothing and $50,000 in Persian rugs were lost or missing, yet fire officials testified that the fire damage was limited, the closets were sparsely filled with clothing, and there was an even layer of ash on top of the closets, indicating the rugs were not there. Furthermore, Goodarzian showed no concern for his allegedly present jewelry on the night of the fire and even stated it was in Europe. The court concluded that “the Appellate Division was, therefore, correct in concluding that, as a matter of law, the insurance policies had been voided by plaintiff’s fraudulent proof of loss.”