Court Finds Insurance Company Waived Defense of Misrepresentation by Policyholder

J.P. Gonzalez-Sirgo
Founder of J.P. Gonzalez-Sirgo, P.A.

When you file a claim for a loss experienced due to a natural catastrophe that causes devastating damage to your home, you will presumably file a claim with your insurance carrier.  Many policyholders are surprised to learn that their insurance company has chosen to deny or radically underpay their claim.  Sometimes insurers will rely on inaccuracies, misrepresentations and non-disclosure on the policy application, proof of loss or other documents as a basis to deny an otherwise valid claim.  Frequently, the insurance company will rely on information that was on the original policy application despite accepting premium payments and engaging in other actions which are inconsistent with rescission of the insurance policy. 

A recent Georgia case demonstrates the unethical tactics insurance companies use regarding sometimes innocent misrepresentations to deny insurance claims.  The case of Casey Enterprises v. American Hardware Mutual Insurance Co. also provides an example of ways courts can elect to protect policyholders from such tactics.  Fite Casey filed an insurance claim for damage suffered to Pendley Hills Hardware and Minit Check Grocery in a fire.

When Casey originally applied for the policy 2 years earlier, he completed an application for the policy as the president of Casey Enterprises.  State law did not impose the requirement that the insurer establish fraud to justify denial of the claim.  Rather, it is sufficient for the insurer to prove the policyholder made an innocent omission or inaccurate representation of a material fact.  The statutory provision in question provided:

“Misrepresentations, omissions, concealment of facts, and incorrect statements shall not prevent a recovery under the policy or contract unless:
(1) Fraudulent; or

(2) Material to the acceptance of the risk, or to the hazard assumed by the insured, or

(3) The insurer in good faith would … not have issued the policy or contract … if the true facts had been known to the insurer as required either by the application for the policy or contract or otherwise.”

While the provision does not contain any language excusing innocent omission or misrepresentation, the court found a way around the provision in this case because of the duplicitous nature of the insurer’s conduct.  When the policy was completed, Casey answered questions asked by the insurance agent who took notes during the interview.  The application only indicated a single mortgage though two mortgages existed on the property.  The insurer also claimed that errors in the policyholder’s proof of loss also were waived.  Under the law of the state, the proof of loss was voluntary.  The application also only disclosed one of several prior property or liability losses during the preceding three year period.

Based on the statute referenced above, the insurer legitimately could claim misrepresentation and omission regarding the omitted mortgage and prior insurance claims as a defense, but the court found that the insurer waived its defense based on erroneously omitted or misrepresented information.  Evidence produced by the insured indicated that the insurer became aware of the 2nd mortgage two months after issuing the policy but continued to accept premium payments.  The court also found that any defense of misrepresentation related to the undisclosed claims also was waived because the insurer issued the policy despite being aware of the undisclosed claims.  With regard to inaccuracies in the proof of loss, the court indicated these mistakes did not constitute a basis for denying the claim because the insured was under no obligation to provide the document.

This case demonstrates how effective legal representation by an experienced insurance claims attorney can allow a policyholder to overcome defenses that might be asserted by an insurer in a breach of contract lawsuit.  If you have questions about Florida insurance claims, you are welcome to contact one of our Miami insurance claims attorneys.  My law firm represents policyholders in claims disputes 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.

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