Policyholders are often frustrated and appalled when their legitimate insurance claim is met with indifference and delay. When an insured files a claim, the most common justifications offered by insurance companies for a denial involve claims that the loss is not covered or the failure of the policyholder to comply with post-loss conditions. However, another common strategy frequently relied on by insurance carriers to avoid paying claims is predicated on post-loss rescission. The Florida Legislature recently took steps to limit this tactic in the context of homeowners’ claims, but insurers still utilize this harsh tactic against many unsuspecting policyholders.
This technique for declining claims involves rescinding an insurance policy based on inaccurate information in the policy application under Florida Statutes § 627.409 if the following apply:
(a)The misrepresentation, omission, concealment or statement is fraudulent or is material either to the acceptance of the risk or to the hazard assumed by the insurer.
(b)If the true facts had been known to the insurer pursuant to a policy requirement or other requirement, the insurer in good faith would not have issued the policy or contract, would not have issued it at the same premium rate, would not have issued a policy or contract in as large an amount, or would not have provided coverage with respect to the hazard resulting in the loss.
There are some obvious and troubling aspects to the standard set forth by this statute for rescission of an insurance contract. First, the standard that must be met by the insurance company regarding the inaccurate or omitted information is relatively easy to satisfy. Even if the omission of misrepresentation of erroneous information was not knowing or intentional, the insured can be subject to rescission if the incorrect information impacted the insurer in any of the ways indicated in subdivision (b).
Because of the obvious potential for abuse by insurance companies that sandbag policyholders by continuing to accept premiums despite knowledge that the policy will be rescinded if a claim is ever filed, the insurance company may be deemed to waive the right to rescind a policy based on inaccurate information. If the insurance company knows of facts regarding a misrepresentation, non-disclosure or concealment, the insurer may be deemed to have waived the right to rescission by undertaking an “unequivocal act” that suggests the policy continues to be effective or which is not consistent with forfeiture of the policy. To establish waiver, the insured must prove the following: (1) the existence of an advantage, right, or benefit; (2) actual or constructive knowledge of its existence; (3) an intention to forfeit that right.
The case of Johnson v. Life Insurance Company of Georgia, 52 So.2d 813 (Fla. 1951) is a leading case on waiver by an insurance company. In Johnson, the insurer refused to pay a death benefit after a life insurance policyholder passed away. The insurer denied payment of the policy benefits on the grounds that the original policy application contained material misrepresentations. There was no significant dispute that the application contained inaccuracies regarding the state of the insured’s health and prior medical care.
The misrepresentations became known to the agent who issued the policy only two months after the policy was issued. The insurance carrier continued to accept premium payments from the policyholder even after the agent became aware of the misrepresentations. The court found that the knowledge of the agent constituted constructive knowledge by the insurance carrier. While the insurance company did not actually challenge whether the insurance company should be determined to have constructive knowledge based on discovery of the misrepresentations by the agent, the court ruled that under these circumstances the knowledge of the agent is imputed to the insurer.
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].