This is the second installment of a two-part blog post that discusses negative consequences associated with failing to accurately represent information when applying for insurance. Part I of this blog series reviewed the facts of a recent 5th DCA case allowing the insurer to rescind a policy because the insured failed to disclose a high-risk licensed driver living in the home. Part II provides an analysis of the court’s decision along with important points that policyholders should know.
Based on the facts discussed in Part I of this blog post, the appellate court observed that the Clarks’ son lived in the home at the time the application for coverage was submitted to PURE. The court noted that the insurance policy (like many auto and excess liability policies) imposed a duty on the Clarks as insureds to disclose every licensed family member. Since the son was a licensed driver in the home at the time of commencement of the policy, the court reasoned the Clarks misrepresented material facts during the application process.
The policy expressly provided that it would be rendered void if the policyholders intentionally concealed or misrepresented material facts, engaged in fraud, or gave false statements. While the Clarks argued that no evidence had been produced revealing any “intentional” concealment, the appellate court ruled that a false statement constituted sufficient grounds to rescind the policy even if the inaccuracy was inadvertent.
The 5th DCA relied on a prior decision that interpreted Florida Statutes Section 627.409(1) as ruling that a misrepresentation did not need to be knowingly made or fraudulent. Instead, the misrepresented or undisclosed information merely needed to affect the level of risk in issuing the policy. This standard could be satisfied by showing the information at issue would have affected the policy terms, especially the premium amount. Since the Clarks failed to disclose a high-risk driver was living in the home, the court held the Clarks failed to fulfill their affirmative duty of disclosure under the policy.
There are several important takeaways from this decision. The most obvious point to be gleaned is that policyholders need to be accurate and forthcoming when submitting an application for insurance. The payment of insurance premiums can be a waste if the insurer can rescind the policy once a claim is made in the wake of a traffic collision. While it might be tempting to withhold certain information that could lead to a denial of coverage or higher premiums, the failure to provide information that you are contractually required to disclose or material misrepresentations can undermine the entire value of obtaining a policy.
Policyholders also need to note the importance of ensuring that an independent insurance agent communicates information correctly under a policy. While the record in this case is sketchy on this issue, the Clarks let the agent coordinate the application process on their behalf. Although an insured might have the option of pursuing a claim against an agent that misconstrues information when preparing an application, the best alternative is to confirm that the information provided to a carrier is accurate.
The final point to note about this case is that inadvertence or mistake do not neutralize the impact of a material misrepresentation. The Clarks attempted to excuse their false statement or non-disclosure regarding their son moving back into the family home based on inadvertence. However, the information in the insurance application was considered false, which constituted a basis for denial and rescission even with no wrongful intent by the insured.
Our bad faith insurance law firm in Miami invites you to contact us if you are having difficulties with your insurance company. Florida insurance claims lawyer J.P. Gonzalez-Sirgo handles claims against insurance companies in Miami and throughout Florida. The Law Firm of J.P. Gonzalez-Sirgo, P.A. offers free consultations and case evaluations. No Recovery, No Lawyer Fees. Call 305-461-1095 or Toll Free 1-866-71-CLAIM.