Lies on Application & Insurance Never Existed

Rescission Results Policy Void From its Inception
ARSON FOR PROFIT IS A VIOLENT CRIME

Imperial Casualty and Lloyd's Underwriters retained me in the 1980's to advise concerning the fire claim presented by Levon Sogomonian and his wife as a result of a major arson fire and explosion that destroyed their home. The investigation took more than a year, multiple days of examination under oath (EUO), death threats to the claims investigator and a bomb threat at my office, that eventually established the leading case in California concerning rescission of insurance.

In Imperial Casualty And Indemnity, Company v. Levon Sogomonian and Elichka Sogomonian, No. B022012, 243 Cal.Rptr. 639, 198 Cal.App.3d 169, Court of Appeal, California (Feb. 4, 1988) Levon and Elichka Sogomonian (defendants) appealed from a summary judgment entered in favor of plaintiff Imperial Casualty Insurance Company (herein "Imperial") on both Imperial's complaint and defendants' cross-complaint.

FACTUAL BACKGROUND

On July 14, 1982, Imperial issued a homeowner's policy to defendants which provided casualty and fire insurance protection for defendants' home. On or about October 9, 1982, defendants' home was destroyed by a fire and explosion. A second fire on October 10, 1982 a second arson fire destroyed what had not been destroyed by the first fire.

Following an investigation, Imperial concluded that certain misrepresentations and a number of omissions had been made by the defendants in their application for the policy which they had submitted to Imperial on June 7, 1982. Imperial sued, seeking: Rescission of the policy ab initio, together with the judgment of the court so declaring; and  repayment, with interest, of advance payments (against the then anticipated fire insurance proceeds) of $30,300 which Imperial made to the defendants on or about November 18, 1982.

In its motion for summary judgment Imperial produced evidence that the defendants, in responding to questions in the policy application, (1) specifically denied (for the immediately preceding three years) any loss history and any policy cancellations or renewal refusals and (2) failed to include the following facts:

That in February of 1980 (within three years of their application to Imperial) defendants suffered landslide damages to their property which resulted in a legal action for $500,000 in damages filed against them by a downhill neighbor. This claim was submitted by the  defendants to their then insurance carrier, Equitable General Insurance Company;
That in early 1981 defendants suffered an uninsured loss by theft of precious stones exceeding $100,000 in value;
That on December 12, 1981, Underwriters Insurance Company had cancelled a homeowner's policy which it had previously issued on the same property here involved;
That on March 29, 1982, defendants had presented a water damage claim to Blue Ridge Insurance Company with respect to this same property;
That, on April 5, 1982, over two months prior to the submission of the application to Imperial, the defendants had been notified by Blue Ridge Insurance Company of the non-renewal of the homeowner's insurance policy which that company had theretofore issued. Subsequently, on July 19, 1982, just a few days after the issuance of Imperial's policy, defendants were informed that the reason for such non-renewal was substandard property maintenance by defendants of the same property here involved. Defendants did not ever provide such information to Imperial;
That at the time of the application, there was pending a lawsuit with Equitable Life Assurance Society, wherein that company sought to rescind a health policy on the grounds that defendants had made material misrepresentations and omissions in the application for that policy;
That at the time the application was made to Imperial defendants had a second mortgage on their property with Alliance Bank (the existence of a first mortgage with American Savings & Loan Association was disclosed; however, the total owed on the home was approximately $425,000 of which nearly one-half, or $200,000, was secured by the undisclosed second trust deed).

Imperial offered the deposition testimony of its former underwriter who was responsible for making the decision to issue the subject policy. She testified that she relied on defendants' application and had she known the "true facts" she would not have approved the issuance of the policy.

DISCUSSION

In their brief, defendants effectively conceded that of the established material issues of fact claimed by Imperial, they only really disputed three.

Given the state of this record and defendants' concession in their brief, the Court of Appeal was compelled to the conclusion that no factual dispute exists with respect to the fact of defendants' concealment of certain information requested by Imperial. Moreover, there is no factual dispute that Imperial issued the policy in reliance on the truth of the statements made by the defendants and that Imperial's underwriter has stated that had Imperial known the actual facts, which only came to light during the post fire investigation, it would not have issued the policy.

The Court of Appeal concluded that the application submitted by the defendants to the information sought by Imperial and denied to it by the false negative answers and omissions of defendants were material to Imperial's decision to provide insurance coverage. That conclusion is the only one that reasonably can be drawn from the undisputed evidence presented.

Rescission of The Policy of Insurance Bars Any Claim By the Insured Under Insurance Code Section 790.03(h).

“A contract is extinguished by rescission." (Civil Code § 1688.) The consequence of rescission is not only the termination of further liability, but also the restoration of the parties to their former positions by requiring each to return whatever consideration has been received.

DISPOSITION

Since the summary judgment did not provide a complete restitution to Imperial and Lloyd's, the judgment was reversed, with directions to the trial court to make and enter a new order granting summary adjudication of issues which is consistent herewith.  A trial was held thereafter and I testified as a fact and expert witness only to have Mr. Sogomonian threaten my life as I entered the courtroom to testify. Judgment was had in favor of Imperial and Lloyd's and they recovered all advance payments, attorneys and investigation fees.

ZALMA OPINION

Importantly this case established the law of the state of California with regard to rescission of insurance. Although there was evidence that the fire was created on behalf of Mr. Sogomonian no criminal charges were brought and Sogomonian continued to attempt to gain from the fire by suing the investigator. In 15 years of work all litigation was resolved, Sogomonian paid, and went on to litigate with others on various other schemes. Contrary to his hopes I survived and am now 81-years-old and still working.

If you want the full details of this case see my book "Arson for Terrorism and Profit" a fictionalized novel about arson for profit available at https://www.amazon.com/dp/1653323183/ref=sr_1_2?keywords=arson+for+terrorism+and+profit&qid=1577809094&sr=8-2

(c) 2023 Barry Zalma & ClaimSchool, Inc.

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