Material Misrepresentation in Insurance

Photo of legal scales and judge gavel. Material misrepresentation in insurance.

Material misrepresentation in insurance happens, even if it’s accidental. It’s important to properly document and disclose accurate facts when obtaining or renewing insurance policies. Otherwise, you could be in danger of material misrepresentation, leading to possible issues if you ever have to settle an insurance policy dispute.

We have two examples of recent court cases heard in the Michigan Court of Appeals. These cases demonstrate the importance of updating your insurance policy information with your insurance carrier.

 

True Purchase Price Material Misrepresentation

Council v. Allstate Vehicle & Property Ins. Co., Michigan Court of Appeals (Unpublished), Docket Number 351676, February 18, 2021. The insurer could void its policy as Plaintiff made material misrepresentations on the insurance application as to the true purchase price of the home. Plaintiff sued his homeowner’s insurer, Allstate. Allstate voided its policy due to Plaintiff’s material misrepresentations on the insurance application.

In investigating Plaintiff’s fire loss claim, Allstate discovered that Plaintiff paid $10,000 for the home in 2014. But, in March 2017, Plaintiff represented on his insurance application that the purchase price of the home was $75,000.  Plaintiff also documented the current market value of the home was $75,000.

Per MCL 500.2218(1), Allstate voided the insurance policy based on the misrepresentation.

Even though Plaintiff claimed that he didn’t provide his agent the purchase price or market value, and didn’t know where the agent obtained this information, the Court of Appeals found that there was no genuine issue of material fact as to misrepresentations on the application. Plaintiff was given the application to read and signed the application. The application included a statement that he read the answers and agreed that the information was true.

Because the purchase price was material to Allstate’s determination as to whether it would insure the property and because Plaintiff misrepresented the purchase price, the policy was voidable.

 

Personal Injury Protection (PIP) Material Misrepresentations

McCarty v. Akins, Michigan Court of Appeals (Unpublished), Docket Number 350052, January 21, 2021. Due to Plaintiff’s material misrepresentations, the insurer was not liable for Personal Injury Protection (PIP) benefits, and the rescission barred Plaintiff’s tort recovery.

Plaintiff failed to disclose on her application for auto insurance that she lived with her father. The trial court determined that the appropriate remedy for Plaintiff’s action was rescission (cancellation) of the auto policy. The Court of Appeals upheld the trial court’s decision on rescission.  

Because Plaintiff had no auto insurance on the vehicle she owned, she failed to meet the mandate of MCL 500.3101 as it then applied. Consequently, Plaintiff could not recover any Personal Injury Protection (PIP) benefits from Defendant and could not recover in tort from the alleged at-fault driver.

Did you know?  There are changes to Michigan No-Fault Auto Insurance. These changes became effective July 2020.

 

Questions About Material Misrepresentation?

If you have any questions about your coverage, or to review coverage options, please contact us. For helpful tips on other popular topics, check out our articles on Cyber Insurance, Winter Home Protection, and Ransomware Developments. As always, we are here to help you, your employees, and your business with all your insurance needs — from commercial insurance to group benefits to personal insurance. Thank you for allowing Mason-McBride to serve you!

 

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