Strategies for defeating the material misrepresentation defense in insurance actions: a plaintiff's perspective.

• Author: Giulianti, Stacey A.
• Position: Florida

The material misrepresentation defense is a tactic that has long been used by insurance companies to defeat claims. Although carriers use the term "material misrepresentation defense," lawyers for policyholders sometimes refer to it as "post-claims underwriting." This defense involves a comprehensive attempt by insurance carriers to review every square inch of an application for insurance, hoping to identify an item in the application that was left out or completed incorrectly. If the carrier discovers even a minor error in the application, it may attempt to void all coverage based on that "misrepresentation," and deny all claims submitted.

A typical factual scenario giving rise to a material misrepresentation defense might be as follows: Prior to the completion of the insurance application, the insured specifically tells her insurance representative that her 15-year-old son lives at home, but does not drive her car. In fact, the son does not even possess a driver's license. The insurance representative fills out the entire application, and presents it to the insured, who signs it without reading it. Unbeknownst to the innocent policyholder, the insurance representative failed to list the son on the application under the section that stated, "Please list all drivers and residents of the household over 14 years of age." When a claim is made on the insurance policy, the carrier may try to use the insured's alleged misrepresentation regarding her 15-year-old son as a basis to deny coverage.

In this scenario, plaintiffs have several means available to defeat a material misrepresentation defense. As a threshold matter, the nature of the material misrepresentation at issue and its causal relationship to the loss must be carefully analyzed. Not all misrepresentations are sufficient to support a denial of coverage. Even where a material misrepresentation exists that is causally connected to the loss, a plaintiff may still be able to defeat a material misrepresentation defense in certain circumstances. The law of agency may dictate that errors or omissions in the completion of the insurance application are attributed to the insurance company, not the insured. Likewise, a misrepresentation defense may not be available where the insurance application itself was ambiguous or misleading.

Nature of Misrepresentation and Its Causal Relationship to the Loss

The first issue that a plaintiff must address when confronting a material misrepresentation defense is the nature of the insured's alleged misrepresentation. F.S. [section] 627.409(1) provides as follows:

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...