In a previous article, I discussed how an insured’s misrepresentation in its application for insurance or in the negotiation of insurance coverage could preclude recovery under the policy. This is provided for in Florida Statute s. 627.409:
(1) Any statement or description made by or on behalf of an insured or annuitant in an application for an insurance policy or annuity contract, or in negotiations for a policy or contract, is a representation and not a warranty. . . . [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.
The Eleventh Circuit explained that sections (1)(a) and (b) above center “on misrepresentations material to the risk, that is, material to the insurer’s decision whether to issue the policy, and, if so, at what premium.” Gamez v. Ace American Insurance Company, 26 Fla. L. Weekly Fed. C887a (11th Cir. 2016).
For example, in Gamez, the insured procured a wet marine insurance policy covering his boat. The insured claimed in the insurance application that he was the owner of the boat, would be the primary operator of the boat, and the boat would be kept at his residence. However, the evidence showed that the insured actually bought the boat for his cousin, as his cousin was the primary operator, the boat was located at his cousin’s residence, and that his cousin made many of the monthly payments. A loss occurred when the cousin lent the boat to an acquaintance; the insured thereafter instituted an action to recover the loss from his insurer. The jury, however, returned a verdict in favor of the insurer finding that the insured misrepresented a material fact related to the application of the wet marine insurance policy. In other words, had the insured explained that he was simply buying the boat for his cousin who would be the primary operator, the insurer would have evaluated the risk differently including potentially not insuring the boat.
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