## Facts

- Lucretia Mali and the Estate of Frederick J. Mali owned a barn converted into a residence in Winsted, Connecticut.
- A fire destroyed the barn on April 1, 2005.
- The property and contents were insured under a policy that voided recovery if the insured committed fraud in presenting a claim.
- The Malis submitted a claim estimate of approximately $1.325–$1.5 million; Federal Insurance Company made partial payments totaling $72,665.48 for certain personal-property items.
- In support of their valuation, the Malis provided a sketch describing features of the barn (including a multi-room second floor), which the insurer contested as inaccurate.
- During discovery, the Malis stated they did not possess photographs of the barn’s second-floor interior; at trial, testimony suggested such a photograph had existed.
- The district court instructed the jury that it could (but was not required to) draw an adverse inference from the nonproduction of the photograph if it found the photograph existed and the Malis lacked a satisfactory explanation for not producing it.
- The jury found the Malis submitted fraudulent claims about the value of the barn and its contents, forfeiting coverage, and returned a verdict for the insurer.

## Issues

1. Whether the district court abused its discretion by giving a permissive adverse-inference instruction based on nonproduction of a purported second-floor photograph.
2. Whether the insurer was entitled to attorney’s fees.
3. Whether the insurer was entitled to equitable relief (restitution) to recover the partial payments previously made on the claim.

## Decision

- The Second Circuit affirmed the judgment for the insurer.
- The court held the permissive adverse-inference instruction was a proper exercise of the trial court’s discretion.
- The court rejected the insurer’s cross-appeal for attorney’s fees.
- The court rejected the insurer’s request for equitable restitution of the partial payments previously made.

## Legal Principles

- A permissive adverse-inference instruction may operate as an evidentiary inference grounded in common-sense reasoning from unexplained nonproduction of evidence, rather than as a punitive discovery sanction.
- Where the instruction conditions any inference on jury findings (e.g., that the evidence existed and that the nonproduction lacked a satisfactory explanation) and leaves the inference optional, it generally falls within the trial court’s broad discretion over evidentiary matters and jury instructions.
- Requests for attorney’s fees or equitable reimbursement must be properly preserved and supported by applicable contractual language or legal authority; otherwise, they may be rejected as forfeited or without merit.

## Conclusion

The Second Circuit upheld a permissive adverse-inference instruction concerning a missing photograph in an insurance-fraud coverage dispute, affirmed the jury’s finding that the insureds forfeited coverage by submitting fraudulent claims, and denied the insurer’s cross-claims for attorney’s fees and restitution of prior partial payments.


Mali v. Fed. Ins. Co., 720 F.3d 387 (2d Cir. 2013)