Confirm the Accuracy of Information Included in the Insurance Application to Avoid Rescission

When filling out an application for insurance, make sure to confirm the accuracy of the information you include. The information you include will likely go to the very risk the insurer is assuming by issuing an insurance policy. “If an insured’s misrepresentation was material to the insurer’s acceptance of the risk or, if the insurer in good faith would not have issued the policy under the same terms and premium, then rescission of the policy by the insurer is proper.” Certain Underwrites at Lloyd’s London v. Jimenez, 41 Fla.L.Weekly D1431a (Fla. 3d DCA 2016). If the insurer rescinds the policy based on an inaccuracy in the application for insurance, then you now have no insurance covering the risks you want insured.  

For example, in Jimenez, an insured homeowner filled out an insurance application representing he had a central station monitor that monitored smoke, temperature, and burglary. After the policy was issued, a kitchen fire caused damage to his home. It turned out the homeowner did not have a central station monitor that monitored smoke and temperature. The insurer moved for declaratory relief arguing that the homeowner’s insurance policy should be rescinded. The Third District agreed that the insurer was entitled to rescind the insurance policy based on this misrepresentation. This means the insured has no coverage for the kitchen fire damage.

Morever, Florida Statute s. 627.409(1) states:

[A] misrepresentation, omission, concealment of fact, or incorrect statement may prevent recovery under the contract or policy only if any of the following apply:

(a) The misrepresentation, omission, concealment, or statement is fraudulent or is material 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.

Thus, “[t]he misrepresentation [from the insured to support a rescission of the policy] need not be fraudulently or knowingly made but need only affect the insurer’s risk or be a fact which, if known, would have caused the insurer not to issue the policy or not to issue it in so large an amount.” Jimenez, supra.

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

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