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

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

Miami and Florida Statute 627.409 Life Insurance 

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However, the policy can be rescinded only if the insurer can prove that the misleading or incorrect application statement was either material to the insurer’s risk acceptance or fraudulent.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 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 Even if the mistake was made accidentally, a policy can be rescinded so long as the material misrepresentation affected the premium provided and the coverage offered.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 accidentally forgot to fill out application information asking about the policyholder’s drinking habits. Now suppose the policyholder has been a drinker for decades.

Naturally, the insurance company would have wanted to have this completed, accurate information before insuring the policyholder. If the insurer can prove that they would have charged a higher premium, provided different coverage or would not have offered the policyholder with coverage at all, then the insurer can effectively prove that a material misrepresentation existed.

Florida law would then permit the insurer to cancel coverage and deny all claims. Given the typically confusing nature of insurance application questions, it is clear that accidental mistakes on a policy application can give insurance companies a helpful advantage when pursuing a material misrepresentation defense.

  • Policyholders should not merely accept an insurance company’s rescission of coverage based on a material misrepresentation, however.
  • The insurance company’s argument may be based on weak evidence, and a Florida life insurance lawyer can help you fight a claim denial.

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 a material representation exists. Depending on the specific circumstances, an experienced life insurance claims lawyer may be able to build a strong case on your behalf that proves a misrepresentation was not truly material to the risk assumed by the insurer. Further, insurance company arguments built on weak evidence may justify the defense that no misrepresentation existed at all.

For instance, the example used earlier concerning a policyholder who left a question blank could go one of two ways. Some Florida courts have held that insurers who accept an incomplete application do so at their own risk (Independent Fire Ins. Co. v. Horn, 343 So.2d 862 (Fla. 1st DCA 1976). Utilizing legal arguments that incorporate Florida case law can strengthen your defense against the insurance company’s accusations.

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]



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