Dadurian v. Underwriters at Lloyd's of London
787 F.2d 756 (1986)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
An insured who knowingly makes a false statement under oath regarding a material fact during an insurer's investigation voids the insurance policy. A statement is considered material if it is reasonably relevant to the insurer's investigation, regardless of whether it proves decisive to the ultimate disposition of the claim.
Facts:
- Over a 30-month period from August 1977 to January 1980, Paul Dadurian allegedly purchased 12 pieces of jewelry from jeweler James Howe for a total of $233,000 in cash.
- Dadurian did not obtain any sales slips, receipts, or other documents for the alleged purchases, and Howe kept no records of the transactions.
- On March 2, 1980, Dadurian obtained a 'Jewelry Floater' insurance policy from Lloyd's, London, insuring the 12 items for up to $267,000, based on appraisals prepared by Howe.
- On April 12, 1980, Dadurian reported that the insured jewelry had been stolen from his home safe during an armed robbery.
- During a subsequent formal examination under oath conducted by Lloyd's counsel, Dadurian swore that the cash used for the jewelry purchases came from specific bank loans.
- Dadurian identified 13 specific promissory notes, by date and amount, as the source for $166,000 of the purchase money for 11 of the jewelry items.
- Lloyd's subsequently refused to indemnify Dadurian, asserting that his claim was fraudulent and that he had knowingly made false statements.
Procedural Posture:
- Paul Dadurian filed a diversity action against Lloyd's, London in the United States District Court for the District of Rhode Island, seeking compensation under an insurance policy.
- The case was tried before a jury, which rendered four special verdicts in favor of Dadurian.
- The jury found that Dadurian had been robbed and had not made any knowingly false statements on material subjects.
- The district court entered judgment for Dadurian in the amount of $267,000 with interest.
- Lloyd's moved for a judgment notwithstanding the verdict (JNOV), or in the alternative, for a new trial.
- The district court denied Lloyd's motion.
- Lloyd's (appellant) appealed the denial of its motion to the United States Court of Appeals for the First Circuit, with Dadurian as the appellee.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Does an insured's knowingly false testimony under oath regarding a material fact, specifically the source of funds used to purchase the insured property, void the insurance policy?
Opinions:
Majority - Campbell, C.J.
Yes, an insured's knowingly false testimony under oath regarding a material fact voids the insurance policy. The court found that the source of the funds used to purchase the jewelry was a material fact because it was reasonably relevant to Lloyd's investigation into the credibility of Dadurian's ownership claim, especially given the complete lack of documentation. Evidence at trial demonstrated conclusively that Dadurian's sworn statements linking specific bank loans to the jewelry purchases were false. The court reasoned that Dadurian's explanation of being honestly mistaken 'strains credulity,' as he had ample time and opportunity to verify the information before presenting it with such certainty. This 'total indifference to the truth or falsity of his assertions' indicated a willful misrepresentation equivalent to a knowing falsehood. Therefore, the jury's verdict finding that Dadurian did not knowingly give false answers was against the great weight of the evidence, constituting a manifest miscarriage of justice that required a new trial.
Analysis:
This decision reinforces the high duty of good faith and fair dealing an insured owes to an insurer during a claim investigation. It solidifies the principle that materiality is broad; a false statement is material if it is reasonably relevant to the investigation, not just if it pertains to the ultimate cause of loss. The court's willingness to overturn a jury's finding on a credibility question, while stopping short of ordering a judgment notwithstanding the verdict, signals that appellate courts will not permit verdicts to stand that are overwhelmingly contradicted by objective evidence. The case serves as a strong precedent for insurers to void policies where an insured provides knowingly false or recklessly indifferent statements during an examination under oath.
Unlock the full brief for Dadurian v. Underwriters at Lloyd's of London