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Fraudulent procurement defense precluded

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Gutierrez v United Servs. Auto. Assn., 2015 NY Slip Op 50797(U)(App. Term 2d Dept. 2015)

“Plaintiff correctly argues that defendant failed to demonstrate that it is not precluded from asserting its proffered defense—that the insurance policy at issue was fraudulently procured—as it failed to establish that it had timely denied plaintiff’s claim on that ground (see Westchester Med. Ctr. v GMAC Ins. Co. Online, Inc., 80 AD3d 603 [2011]; Great Health Care Chiropractic, P.C. v Hanover Ins. Co., 42 Misc 3d 147[A], 2014 NY Slip Op 50359[U] [App Term, 2d, 11th & 13th Jud Dists 2014]).”

Preclusion really should not apply to this defense.  While Fair Price dealt with provider fraud, there was always a distinction (as unnatural as it might seem) between provider fraud and EIP fraud.  The latter would not result in coverage, whilst the former would be immaterial to coverage.  Still think Westchester/GMAC was incorrectly decided.

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