Denials based on Misrepresentations

Occasionally, an insurance company will attempt to void or deny a homeowner’s claim due to alleged misrepresentations that the homeowner may have made when filling out the insurance application. When an insurance company attempts to void or rescind coverage based on misrepresentation by their insured, it is doing so based upon Florida Statute 627.409. This Statute says that statements or descriptions made on an application for insurance are representations and not warranties and as a result, a misrepresentation may only prevent recovery under the policy in two situations.

The first situation occurs when the misrepresentation is material either to the acceptance of the risk or to the hazard assumed by the insured. This means that there must be some causal relation between the misrepresentation and the loss. The other situation occurs when there is misrepresentation and if the true facts had been known to the insurer, the insurer, in good faith, would not have issued the policy, would not have issued it at the same premium rate, would not have issued a policy in as large an amount, or would not have provided coverage with respect to the hazard resulting in the loss. This type of situation is not resolved just by the mere pronouncement of the company, but the misrepresentation must be of such character that the court can say it would have reasonably affected the insurer’s judgment as to the nature of the risk and amount of the premium.

An insurer seeking to rescind or avoid coverage bears the burden to plead and prove the misrepresentation, its materiality, and the insurer’s detrimental reliance. If an insurance agent fills out the application for the insured, the insurance company is bound by their agent and any issues of whether the agent wrote down the wrong answer or if it is the answer the insured actually gave is a matter for a jury to decide. Allegations of material misrepresentations may also be defeated if the questions is ambiguous as any ambiguity in the policy or the application will be construed in favor of the insured. As always, the policy and insurance application must be read in conjunction as the insurance contract may offer more protection for the insured against allegation of misrepresentations than the Florida Statutes can offer.