Bersani v. General Accident Fire & Life Assurance Corp., 36 N.Y.2d 457 (1975)

An insurer cannot avoid liability under a standard fire insurance policy based on an agreement that no claim would be made on the policy, as such agreements are against public policy and violate the statutory requirements for standard fire insurance policies.

Summary

Bersani involved a dispute over a fire insurance policy. The insurer, General Accident, attempted to avoid paying a claim based on a prior oral agreement that no claims would be made under the policy. The New York Court of Appeals held that such an agreement was unenforceable because it violated the state’s Insurance Law mandating a standard fire insurance policy. The court reasoned that the policy must conform to statutory requirements and that an agreement attempting to nullify the insurer’s obligation was against public policy. The court affirmed the Appellate Division’s judgment in favor of the insured, holding the insurer liable for the loss.

Facts

Augusto Bersani and August Galasso purchased property in Niagara Falls in 1966 and obtained a fire insurance policy from General Accident. Augusto Bersani later transferred his interest to his sons, David and Rudolph Bersani, and the policy was endorsed to reflect the change in ownership. Prior to the transfer, Galasso and Augusto Bersani, through their agent McDonald, allegedly agreed with Richard Stevens, the insurer’s agent, that no claims would be made under the policy, as it was primarily obtained to facilitate a mortgage. A fire subsequently destroyed the main building on the property.

Procedural History

The trial court upheld the insurer’s defense, finding no liability based on the agreement not to make a claim. The Appellate Division reversed the trial court’s decision and directed judgment for the plaintiffs (the insureds). The Court of Appeals affirmed the Appellate Division’s order.

Issue(s)

Whether an insurer can avoid liability under a standard fire insurance policy based on an oral agreement that no claims would be made under the policy, when such an agreement contradicts the statutory requirements for standard fire insurance policies and is against public policy.

Holding

No, because the agreement violates the New York Insurance Law requiring a standard fire insurance policy, and such agreements are against public policy.

Court’s Reasoning

The court reasoned that Section 168 of the Insurance Law mandates a standard fire insurance policy, and any agreement contradicting its terms is unenforceable. The court stated that “[n]o policy or contract of fire insurance shall be made, issued or delivered by any insurer…on any property in this state, unless it shall conform as to all provisions, stipulations, agreements and conditions, with such form of policy.” The court found that the alleged agreement that the insureds would not pursue a claim was against public policy and illegal because it contravened the statutory provisions for standard fire insurance policies. The court also addressed the parol evidence rule, acknowledging that while parol evidence might be admissible to show a contract was a sham, it is inadmissible when its effect would be contrary to law and public policy. The court distinguished cases cited by the insurer, noting that in those cases, the premium had not been paid, and endorsements reflecting change of ownership had not been issued, unlike the present case where those actions indicated the policy was not considered a nullity by the parties. The court emphasized that allowing the insurer to avoid liability based on the oral agreement would undermine the purpose of the standard fire insurance policy mandated by law. The court concluded that the policy was valid and binding on the insurer, thus affirming the Appellate Division’s decision.