In the first decision of its kind, so far as I have seen, the Appellate Term has relaxed the standard by which no-fault insurers establish their founded belief that a claim is fraudulent.

In a string of earlier decisions, the civil courts have rejected insurers allegations of fraud when the investigators testimony has been based in part on unsworn statements from third parties.

The same thing happened in the Civil Court, Queens County (Kevin Kerrigan, J.) when that court granted summary judgment to the plaintiff and rejected State Farms proof of insurance fraud.

State Farms sole issue on this appeal is whether it raised a triable issue of fact by proffering sufficient evidence in admissible form to demonstrate a founded belief that the alleged injuries do not arise out of an insured incident, in that the automobile accident at issue in said third cause of action was staged.

Contrary to the determination of the court below, held the Appellate Term in a 2-1 decision, we find that defendants submission of a sworn affidavit of its special investigator was sufficient to demonstrate such a founded belief notwithstanding the fact that the affidavit contained hearsay allegations.

As further detailed in the dissenting opinion, State Farm submitted the affidavit of its investigator who asserted that the underlying insurance policy was obtained through the unauthorized use of the identity of Sophia Lowe-Davis. The investigator averred that Lowe-Davis was the victim of identity theft as confirmed by NYPD Detective Reedy. No affidavits from either Detective Reedy or Lowe-Davis accompanied State Farms opposition papers, nor is there any explanation as to why they are not tendered.

The judgment in favor of plaintiff was reversed.

Comment: This decision finally acknowledges that, as a practical matter, it is often not possible for investigators to document in admissible form the statements and evidence they obtain during their investigations. However, the standard for opposing summary judgment is to raise a triable issue of fact, not necessarily prove it. As the courts always say, on a summary judgment motion issue finding and not issue determination is the benchmark. An investigators sworn affidavit indicating information obtained from reasonably reliable sources (in this case, police officers), certainly strikes me as enough to raise an issue of fact requiring a trial.

Rogak covers this topic in detail in his book, Rogaks New York No-Fault Law & Practice.

Umed Med., P.C. Denise T. Reed, Alex Ponce and Jared L. Morris v. State Farm Ins. Co. (Appellate Division, Second Department)