Why Do Life Insurance Companies Often Assert a Material Misrepresentation Defense?

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

Life Insurance Claims: Florida Statute 627.409 

The nature of an insurance company’s business model is that payouts must be limited in order to remain profitable. However, an insurance company cannot deny claims on a whim or as the company sees fit.

Rather, Florida life insurance companies must use existing Florida law to justify why a policyholder’s claim should be denied or coverage ought to be cancelled. One of the most common justifications for an insurance company’s claim denial rests upon the legal basis found in Section 627.409 of the Florida Statutes.

Section 627.409 Provides the Basis for an Insurance Company’s Material Misrepresentation Defense

If a policyholder’s application misrepresents, omits or conceals a fact or incorrect statement, then Section 627.409(1) of the Florida Statutes may provide insurance companies with the legal authority to rescind a life insurance policy. Rescission allows a life insurance company to cancel a policy as if it never existed at all.

However, the policy can be rescinded only if the insurer can prove that the misleading or incorrect application statement was either material to the insurer’s risk acceptance or fraudulent. Insurance companies tend to assert that a misrepresentation was material to the risk they were insuring instead of claiming that the incorrect statement was fraudulent.

Why Do Insurance Companies Often Assert a Material Misrepresentation Defense?

A primary reason why insurance companies pursue material misrepresentation defenses is that the intent of the policyholder does not matter. Even if the mistake was made accidentally, a policy can be rescinded so long as the material misrepresentation affected the premium provided and the coverage offered.

In other words, suppose a policyholder mistakenly answered a question on the application regarding the policyholder’s medical history.  If the insurer can prove that it would have charged a higher premium, provided different coverage or would not have offered the policyholder with coverage at all, had it been provided with the correct medical history, then the insurer can effectively prove that a material misrepresentation exists, and void the policy on these grounds.  Florida law permits the insurer to cancel coverage and deny all claims, in such a scenario. Given the typically confusing nature of insurance application questions, it is clear that accidental mistakes on a policy application can give insurance companies a big advantage when pursuing a material misrepresentation defense.

With that said, policyholders should not merely accept an insurance company’s rescission of coverage based on a material misrepresentation and should consult with an experienced life insurance claims lawyer.

Cases Built on Strong Evidence and Florida Law Can Rebut a Material Misrepresentation Assertion

Rescission of a life insurance policy requires the insurance company to prove that a material representation was made by the insured. Depending on the specific circumstances of the case, an experienced life insurance claims lawyer may be able to prove that any misrepresentation was not truly material to the risk assumed by the insurer or that a "misrepresentation" was not made. 

Finally, Section 627.455 of the Florida Statutes provides that an insurance company can only contest a material misrepresentation within two years of the policy taking effect.

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]

Source

http://www.leg.state.fl.us/statutes/index.cfm?App_mode=Display_Statute&URL=0600-0699/0627/Sections/0627.409.html
http://www.leg.state.fl.us/Statutes/index.cfm?App_mode=Display_Statute&Search_String=&URL=0600-0699/0627/Sections/0627.455.html

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