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American Paint Service Inc. v. Home Insurance Co.

decided.: July 1, 1957.

AMERICAN PAINT SERVICE, INC., A CORPORATION OF THE STATE OF NEW JERSEY, APPELLANT,
v.
THE HOME INSURANCE COMPANY OF NEW YORK, A FOREIGN CORPORATION AUTHORIZED TO DO BUSINESS IN NEW JERSEY.



Author: Kalodner

Before McLAUGHLIN, KALODNER and HASTIE, Circuit Judges.

KALODNER, Circuit Judge.

Is false testimony in a trial on a fire insurance policy a factor which the jury should consider in determining whether an insured is guilty of "fraud or false swearing" under a standard policy provision which makes the policy void for wilful concealment or misrepresentations of material facts by the insured before or after the loss?

That question is presented on this appeal from the judgment of the United States District Court for the District of New Jersey entered pursuant to a jury verdict.

The facts may be summarized as follows:

American Paint Service, Inc. ("American") brought suit in the Superior Court of New Jersey upon a policy of fire insurance issued by the defendant, The Home Insurance Company of New York ("insurer"). The policy included coverage against loss resulting from "business interruption" at premises located at 139 Broadway, Paterson, New Jersey, and occupied by American as a paint and wallpaper supply store. The policy coverage, commonly called a "use and occupancy" endorsement, was in the face amount of $30,000 and in its complaint American claimed that a fire interrupted its business resulting in a business interruption loss of $24,467.72.

After removal of the action to the United States District Court of New Jersey, the insurer filed its answer in which it as stated that American was guilty of fraud and false swearing and of wilfully starting the fire. Upon the jury's verdict of no cause of action, judgment was entered for the insurer pursuant to which American now prosecutes this appeal.

At the close of the evidence American had moved to strike the defense of incendiarism on the ground that the evidence relating thereto was legally insufficient. The trial judge denied this motion. American did not renew its motion after the jury's verdict as it was required to do in order for this Court to pass on the legal sufficiency of the evidence. Fed.R.Civ.P. Rule 50(b), 28 U.S.C.; Cone v. West Virginia Pulp & Paper Co., 1947, 330 U.S. 212, 67 S. Ct. 752, 91 L. Ed. 849.

With respect to the defense of fraud and false swearing American also now urges, for the first time, that the evidence on that issue was legally insufficient. American made no motion under Rule 50(b) either before or after the verdict on the issue of fraud and false swearing. That being so, the question may not be raised on appeal. 5 Moore's Federal Practice ยง 50.05 (2d Ed. 1951).

While American's failure to make appropriate motions with respect to the legal sufficiency of the evidence precludes this Court from acting thereon, a new trial must be granted due to errors in the trial judge's charge which were timely objected to by American at the trial.

In charging the jury on the issue of fraud and false swearing, the trial judge read the policy provision which provides:

"This entire policy shall be void if, whether before or after a loss, the insured has wilfully concealed or misrepresented any material fact or circumstance concerning this insurance or the subject thereof, or the interest of the insured therein, or in case of any fraud or false swearing by the insured relating thereto."

With respect to this clause the trial judge charged:

"I would charge you that that fraud or false swearing clause applies not simply to what the Cohen Brothers [officers of American], for instance, or either of them may have said before this trial occurred, ...


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