YOSEMITE, CALIFORNIA – A federal magistrate judge in California declared that an insurance company is entitled to rescind an insurance property policy following false claims stated by the insured.

The motion for default judgment filed by the United States Specialty Insurance Company in its case against Hussein Saleh, a businessman, was granted by U.S. Magistrate Judge Michael J. Seng in the U.S. District Court for the Eastern District of California. In his ruling, the judge pointed out that going forward without the appearance of the defendant would not prejudice the latter or his stand in any way. Seng further noted that the move of the commercial property insurer to simply rescind the contract with Saleh instead of seeking damages benefited the latter more.

The motion is rooted from a case the insurer filed against Saleh, stating that it intended to rescind the contract with the defendant. This came after the company discovered information about incorrect details provided by Saleh when he applied for an insurance policy. Due to the inconsistencies in the claims of the businessman and the results of the investigation conducted by the commercial insurer, Seng sided with the latter. The magistrate judge went on to note that false claims by Saleh were clear breaches of the state law governing insurance policies.

According to allegations made in the case:

Saleh, who owns 3 Hermanos Warehouses, applied for a company insurance policy with United Specialty Insurance Co. In his application, he stated that he installed surveillance cameras in his property. Saleh even claimed that he had a central alarm system to further tighten the security in the area. With these claims, United Specialty agreed to grant the businessman an insurance policy for his warehouse. The insurance policy came into effect on Dec. 22, 2014.

However, United Specialty later found out that Saleh had made misrepresentations in his application for the insurance policy. The insurance company eventually discovered that Saleh’s warehouse did not have any surveillance video camera or other gadgets of the same nature in the vicinity. Their investigation also revealed that the alarm system was not connected to a central station monitoring service.

On Dec. 24, 2014, Saleh claimed that the warehouse had been robbed. In his statement, 50,000 bottles of men’s cologne were declared to have been taken during the robbery. The stolen items were estimated to be worth $1.4 million. In the course of the investigation, Saleh's store manager stated that he did not see the robbers who got the goods. However, no physical evidence was found to validate the statements of the manager regarding the purported crime committed in the warehouse.

“It appears that Defendant simply elected to allow this matter to proceed through default; default was not caused by excusable neglect,” Seng wrote in his decision, according to Lexis Legal News. He added, “Although the Court favors resolving cases on the merits after adversarial proceedings, it cannot force Defendant to participate. Further, as Plaintiff only seeks to rescind its insurance policy, rather than seek damages against Defendant, the Court finds that Defendant will not be overly prejudiced by this default.”

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