Insurance: When does a material misrepresentation justify denial of coverage?

When does an insured's material misrepresentation justify denial of insurance coverage?

Fla. Stat. § 627.409(1) establishes the standards for voiding coverage under an insurance policy for misrepresentation. It provides:

(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 is 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 either 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, in order for an insurer to properly void an insurance contract for misrepresentation, the insurer must prove that the misrepresentation was either “(1) fraudulent; (2) material to the risk; or (3) the insurer in good faith either would have not issued the policy of would have done so only on different terms had the insurer known the true facts.” Continental Assurance Co. v. Carroll, 485 So. 2d 406, 409 (Fla. 1986).  Note also that the misrepresentations need not be knowingly made in order to void the policy. Id. at 408 (citations omitted).

Florida courts have found a material misrepresentation, voiding coverage, where: (1) the insured fails to list a member of the household[1]; (2) the insured fails to list an additional driver[2]; (3) the insured fails to disclose prior losses or cancellation of coverage by a prior insurer[3]; (4) the insured misrepresents military status[4]; (5) the insured misrepresents marital status[5]; (6) the insured misrepresents the automobile’s location[6]; (7) the insured misrepresents whether the automobile had been modified.[7] 

Note that in each of the aforementioned cases, the party seeking to void coverage was required to prove that had the omitted/misrepresented information been known, either (1) the insurer would not have provided coverage; or (2) the insurer would have charged a higher premium for coverage. See e.g., Mercury Ins. Co. v. Markham, 36 So. 2d 730 (Fla. 1st DCA 2010); United Automobile Ins. Co. v. Salgado, 22 So. 3d 594, 597 n. 1 (Fla. 3d DCA 2009). Courts generally examine the insurer’s underwriting standards/policies and look to deposition testimony of the insurer’s adjuster for evidence of whether coverage would have been denied/more expensive. See e.g. Salgado, 22 So. 3d at 597 n.1 (finding that policy would have had a higher premium based on deposition testimony of insurer’s underwriting supervisor and PIP litigation adjuster); Markham, 36 So. 3d at 731 (finding that policy would not have been issued based on express direction to insurance broker in application).

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[1] United Automobile Ins. Co. v. Salgado, 22 So. 3d 594 (Fla. 3d DCA 2009).

[2] Progressive American Ins. Co. v. Papasodero, 587 So. 2d 500 (Fla. 2d DCA 1991).

[3] GRG Transport, Inc., v. Certain Underwriters at Lloyd’s London, 896 So. 2d 922 (Fla. 3d DCA 2005).

[4] United Svcs Automobile Assoc v. Clark, 757 So. 2d 554 (Fla. 4th DCA 2000).

[5] Gov’t Employees Ins. Co. v. Decheona, 610 So. 2d 480 (Fla. 3d DCA 1992).

[6] Penaranda v. Progressive American Ins. Co., 747 So. 2d 954 (Fla. 2d DCA 1999); Bleasdell v. Underwriters Guarantee Ins. Co., 707 So. 2d 411 (Fla. 1st DCA 1998).

[7] Mercury Ins. Co. v. Markham, 36 So. 3d 730 (Fla. 1st DCA 2010).

 Nicholas Mermiges, Esq. is a senior associate at the law firm of Hightower, Stratton, Wilhelm in Miami, FL. For a consultation, call (786) 364-8314.