Court Opinion

ID: 9745179
Source: CourtListenerOpinion
Date Created: 2023-08-26 22:40:08.831997+00
Date Added: 2024-06-11T07:24:57.317010
License: Public Domain

SULLIVAN, Judge,
dissenting.
I am unable to agree with the majority’s conclusion that Norman did not “dominate corporate affairs” (Op. at 1172) and that Lisa did not allow him to do so. The evidence is to the contrary.
In this regard, I note that the requisite degree of management control is described differently in the various cases. The majority uses the phrases “absolute control” or “exclusive management”, but also recognizes that being the “dominant force” or “largely dominating] the affairs of the [corporation].” Op. at 1169 (quoting Miller and Dobrin Furniture Co. v. Camden Fire Insurance Co. Assn. (1959) 55 N.J.Super. 205, 150 A2d 276, 284) will suffice. The same is true of being *1175in “dominant control of the corporation.” Op. at 1169 (citing Erlin-Lawler Enterprises Inc. v. Fire Insurance Exchange (1968) 267 Cal.App.2d 381, 73 Cal.Rptr. 182, 186).
Although Norman owned no stock in the corporation, it was agreed that both he and Lisa would financially benefit if the corporation was profitable. Furthermore, as to the day-to-day operation of the business, Lisa acknowledged that, with her approval, Norman was “in total control”. Record at 255. He had unrestricted check signing privileges and signed all but three of some 220 checks written upon the corporate account. He bought and controlled the inventory, and he took care of the receipts. It is therefore clear that, in the case before us, Norman was the dominant force in the management of the corporate affairs, if not in total control, and Lisa acknowledged and ratified that control.
Yet I am unable to discern in what manner, if any, Norman might benefit financially from the arson. I am inclined to agree that Norman is not shown to have directly or indirectly benefitted from the burning of the inventory. The loss of inventory was a corporate loss, the financial implications of which would devolve solely upon the sole shareholder, Lisa. Thus, although there are policy implications which suggest that insulating the corporation from the acts of the arsonist may tend to encourage fraud or deception, the applicable legal principles would not preclude recovery by the corporation for its loss were it not for the fraud component of Hoosier’s defense.
The majority seems to consider the actual arson and the falsifying of the amount of the insurance loss as inseparable acts insofar as the fraud clause of the policy is concerned. (Op. at 1172-1174). I submit that the falsification of the claim must be considered as a separate and distinct act in applying the fraud provision of the contract. The provision states that the insurer will not pay for any loss in any case of:
1. Concealment or misrepresentation of a material fact or
2. Fraud
committed by an insured at any time and relating to a claim under this policy.
Record at 168.
It cannot be questioned that submission of a claim for $101,124.96 in excess of the actual loss of $36,000 is a gross misrepresentation of a material fact. The .claim was prepared and signed by Norman, who was the secretary' of the corporation. Given his management control over the inventory, it is unlikely that he believed the $101,000 figure was an accurate reflection of the loss. North South’s own accountant testified that the amount claimed “would not have been a possible number.” Record at 392. Under these circumstances, the claim was clearly fraudulent. Be that as it may, the claim was a misrepresentation by the insured, North South, and was signed by Lisa Shoemáker, President of the corporation. Whether or not she knew of the accuracy of the claim, she vouched for it and became a party to the misrepresentation. Upon this basis, I would hold that Hoosier appropriately denied the insurance claim.
I would reverse and instruct the trial court to enter judgment upon the evidence in favor of the defendant.