ASSOCIATED INDUSTRIES INSURANCE COMPANY INC v. Halpern & Pintel, Inc., Defendant-Appellant. (2025)

Order, Supreme Court, New York County (Suzanne Adams, J.), entered May 15, 2024, which, to the extent appealed from as limited by the briefs, granted plaintiff's motion for summary judgment rescinding the insurance policy and declared that plaintiff has no duty to defend or indemnify defendant Halpern & Pintel, Inc. in a related personal injury action, unanimously affirmed, with costs.

In this insurance coverage dispute, plaintiff Associated Industries Insurance Company, Inc. was granted a default judgment against its insured, defendant Joseph Farahnik, on its claim seeking rescission of the policy based on allegations that he made material misrepresentations in his application for insurance.  As a result of his default, Farahnik is “deemed to have admitted all factual allegations contained in the complaint and all reasonable inferences that flow from them” (Woodson v. Mendon Leasing Corp., 100 N.Y.2d 62, 71, 760 N.Y.S.2d 727, 790 N.E.2d 1156 [2003]), including the allegations that he made material misrepresentations in the insurance application.  The policy, therefore, was void ab initio (see Admiral Ins. Co. v. Joy Contrs., Inc., 19 N.Y.3d 448, 461, 948 N.Y.S.2d 862, 972 N.E.2d 103 [2012]).  Thus, Halpern & Pintel, an additional insured, cannot raise a challenge to the finding of material misrepresentation in opposition to Associated's motion for summary judgment as against it (see Colony Ins. Co. v. Danica Group, LLC, 115 A.D.3d 453, 454, 984 N.Y.S.2d 2 [1st Dept. 2014];  Colony Ins. Co. v. Danica Group, LLC, 189 A.D.3d 733, 134 N.Y.S.3d 723 [1st Dept. 2020];  see generally Admiral Ins. Co. v. Joy Contractors, Inc., 19 N.Y.3d at 461, 948 N.Y.S.2d 862, 972 N.E.2d 103).

While Halpern & Pintel may raise equitable defenses to the rescission claim (Colony Ins., 189 A.D.3d at 733, 134 N.Y.S.3d 723), it has not shown that Associated's motion should have been denied based on a waiver defense because there is no evidence that Associated accepted premiums from Farahnik after learning of his alleged misrepresentations (see Continental Ins. Co. v. Helmsley Enters., Inc., 211 A.D.2d 589, 589, 622 N.Y.S.2d 20 [1st Dept. 1995]).  Associated did not waive its claim of recission based on its retention of a prorated portion of the premium after it canceled the policy and commenced this action.  Once Farahnik made his claim, the status quo changed, and Associated's recission of the policy required a judicial determination (Kiss Constr. NY, Inc. v. Rutgers Cas. Ins. Co., 61 A.D.3d 412, 414, 877 N.Y.S.2d 253 [1st Dept. 2009], citing Federal Ins. Co. v. Kozlowski, 18 A.D.3d 33, 40, 792 N.Y.S.2d 397 [1st Dept. 2005]).

We have considered defendant Halpern & Pintel's remaining contentions and find them unavailing.