Even if die in a car wreck and you lied about smoking, breach still increasedthe risk.
Misrepresentation was fraudulent (some states)
Even if it doesn’t increase risk
In other states, intent doesn’t matter, so even if innocent misrepresentation, if material, then breach.
State statutes not uniform. Could define materiality as any of the above.
The court said affirmatory, not promissory. Relevant date is date policy is issued, not the date of thefire.
Could require a promissory warranty, but language has to be clear.
Two reasonable interpretations. Warranted that it was a janitor’s residence only or that was a janitor’sresidence but could have other stuff. When two reasonable interpretations, the insured wins.
The Transformation of Warranty Law
Most jurisdictions: if a term is a representation, the representation must be material in order to voidcoverage.
To void coverage, insurer must prove:
1. The insured made a false/misleading statement
2. That was material
3. That induced justifiable reliance
4. That caused insurer damage
Statement is not false as long as it is substantially true
Majority Rule – intent is not relevant unless it is a statement of opinion
If intent is required, will make everyone’s costs go up.
So majority doesn’t require a fraudulent misrepresentation, the risk of a good faithmisrepresentation is on the insured.
Minority Rule – intent is always relevant, whether fact or opinion
When is a representation material? Varies by jurisdiction:
1. If it contributed to the loss OR
2. If it increased the risk OR
3. If disclosed, the insurer would have denied coverage OR
4. If disclosed, the insurer would have either charged a higher premium or offeredless coverage
POV – majority – objective – is this a fact that would be reasonably material to an insurer inthis line of business?
Even if subjective standard – 99% of things that are relevant to one insurer will bematerial to all insurers.
Closely related to materiality b/c insurers aren’t going to rely on immaterial representations.
Prevents insurer from voiding policy if they knew that the representation was false.
Neill v. Nationwide Mutual Fire Insurance Company
If insured answers agents truthfully but agent makes misrepresentation, insurer cannot rely onmisrepresentation unless insured engaged in fraud or collusion with agent.
Absent fraud or collusion – agent’s knowledge is commuted to the insurance co. and since they knowthe answer, can’t rely.
If agent tells you it’s immaterial, no reason to doubt the agent.
Duty to read application?
Most courts will take a similar position to the one taken in this case, even if signed andmisrepresentation in application, not dispositive. Jury could still find that the insured wasn’tresponsible for misrepresentation. Some courts will be more conservative.
Concealment/Duty to Disclose
Should you have an affirmative duty to disclose if they don’t ask and you know it is material?
Common Law – had a duty and could void coverage.
Applicant knew a fact to be material and failed to disclose it.
Modern Rule – not fair. So relaxed standard. If they don’t ask, led to believe that not material. Wary of insurer’s argument that you knew it was material and didn’t disclose. Insurers should be in the