Most policyholders recognize that insurance companies have a duty to fulfill the terms of an insurance contract. Policyholders also might be aware that they can pursue a claim for breach of contract if their insurer fails to perform its duties under an insurance policy. However, contract damages that can be sought in a breach of contract lawsuit frequently fall short of preventing insurers from denying, delaying, or underpaying legitimate claims. Since the damages under a breach of contract claim would typically involve paying the value of the loss covered under the policy, the insurer risks little by taking tenuous positions and disputing coverage on almost all claims. This problem is addressed by the potential of pursuing a claim for bad faith against an insurance company that engages in egregious conduct, such as failing to investigate a claim, refusing to communicate with an insured, or delaying payment unreasonably. This blog post discusses the common bad faith strategy referred to as unlawful post-claim rescission.
While it is important to be accurate when completing an insurance application, the broad nature of many of the questions make it virtually inevitable that certain information will be overlooked or that the details might be confused. For example, the application might include the following question: “Have you ever been treated for cancer, a head injury or pain, diabetes, or heart disease?” Most people would reasonably assume this question is directed at serious medical conditions and fail to disclose a visit to the doctor for a flu that included severe headaches. While treatment of the flu typically would not be relevant to any claim, the headaches technically fall under the category of “head injuries or pain.”
Because the application will have a litany of broad questions of this nature, policy applicants tend to “zone out” long before their insurance agent slides the policy across his or her desk for review and signature. Policyholders need to be as honest, complete, and straightforward as possible when answering application questions. Further, an applicant needs to carefully review the answers that the agent writes/types on the policy application to ensure that they accurately reflect his or her responses.
This advice can mitigate the risk of having an insurer later deny a claim by indicating that the insured attempted to “defraud” the insurer through misrepresentations in the policy application. Insurance companies often send letters denying claims on this basis and reminding policyholders that the application was signed under penalty of perjury. This thinly veiled threat of criminal charges is designed to demoralize policyholders and discourage claims. If you have been forthright in completing your application, then you should not be intimidated by this type of tactic.
There are strategies that our insurance claims law firm uses to deal with this unethical tactic, such as:
- Denying the misrepresentation was made;
- Challenging whether the objection to omitted or false information was raised in a timely fashion, referred to as the “contestability period” (e.g., 2 years for life insurance claims in Florida); and
- Disputing whether the alleged inaccurate information was “material” (i.e., the information would have impacted the decision to issue the policy under the existing terms).
Although an insurance company can rescind a policy after submission of a claim, post-loss rescission can be an unlawful bad faith practice depending on the situation. If you submit an insurance claim and receive a denial letter that alleges you misrepresented facts in your policy application, you should seek immediate legal advice from an experienced Florida Insurance Claims Lawyer.
You can reach Miami Insurance Claims Lawyer J.P. Gonzalez-Sirgo by dialing his direct number at (786) 272-5841, calling the main office at (305) 461-1095, or Toll Free at 1 (866) 71-CLAIM or email Attorney Gonzalez-Sirgo directly at [email protected].