Material Misrepresentation On Application Where Insurer Would Not Have Accepted the Risk or Issued Said Policy Renders Policy Void Ab Initio
By: Elyse DuBois
The propriety of voiding a policy ab initio in light of a material misrepresentation in the application has been the subject of a lot of recent attention. Decisions by the 9th, 11th, and 13th Judicial Circuits held that the policy was void ab initio, and insurer has no duty to defend claims made under the policy, including PIP benefits, where insurer establishes they would not have accepted the risk or issued the policy, had the material misrepresentation been disclosed. While these ruling are not entirely surprising given the body of law, they are instructive when considering this very fact dependent legal issue.
Direct General Insurance Company (“Direct General”) issued a policy of insurance to Beechram Livingstone Burke, and later rescinded the policy based on Burke’s failure to disclose he was using the insured vehicle for commercial/business purposes. In Direct General Insurance Company v. Beechram Livingstone Burke Case No. 2020-CA-001813-OC (9th Circuit), Direct General brought forth a Motion for Final Summary Judgment against Burke citing their policy and Florida Statute 627.409(1), establishing that had they known the true facts, they would not have issued the policy; issued the policy at the same premium rate; issued the policy with the limits shown; issued the policy with under the same terms and conditions; or provided the coverage with respect to an accident or loss.
The Court found, “a material misrepresentation in an application for insurance, whether or not made with knowledge of its correctness or untruth, will nullify any policy issued and is an absolute defense to enforcement of the policy.” Id.; (quoting United Auto Ins. Co. v. Salgado, 22 So.3d 594(3rd DCA 2009). Here, Direct General established without contrary evidence the material misrepresentation via an Affidavit by the Claims Specialist, and Mr. Burke failed to provide any evidence in opposition. Therefore, the Court found that Mr. Burke’s failure to disclose what the insured vehicle was being utilized for on his application for insurance, was a material misrepresentation, and Direct General properly rescinded the policy.
The 11th Circuit, in Imperial Fire & Casualty Insurance Company v. Nora Huice Case No. 2020-012047-CA-01 (Section CA08), similarly found Ms. Huice materially misrepresented on her insurance application the correct address for garaging her vehicle and failed to correctly disclose her marital status as single. Imperial Fire filed its Motion for Final Summary Judgment establishing they would not have issued the policy at the same premium had they known the correct information. The Court found the EUO transcript of the insured to hold the same evidentiary value as an affidavit or deposition, and the insured failed to provide testimony to contradict that the disclosure would have resulted in an increased policy amount. Final Summary Judgment was entered against Nora Huice, and the Court held the policy was properly rescinded.
The 11th Circuit held in similar cases, The Responsive Auto Insurance Company v. Erika Belotti Case No. 2020-018972-CA-01 (Section CA27) and Direct General Insurance Company v. Danny Imran Case No. 2020-01616-CA-01 (Section CA 06), that Plaintiff properly rescinded the insurance policy where Defendant failed to disclose the correct garaging address for the insured vehicle. Plaintiff presented evidence establishing they would not have issued the policy with the same premium had they known the correct information, and again, there had been no oppositional evidence or contradictory testimony.
Finally, in Imperial Fire and Casualty Insurance Company v. Zenia Alonso Diaz Case No. 2020-CA-009156 (13th Circuit), the court found that failure to disclose other household residents at the policy’s inception was a material misrepresentation. Furthermore, the court found that the materiality of the risk was determined at the time of application and not the subsequent date of loss. The insurer’s Motion for Final Summary Judgment was granted by the Court, as again there was no evidence contradicting the contention that the policy would have been issued at a higher premium had the insurer known about the additional household residents.