Insurance company claims I lied

Question: My insurance company completed an investigation, and reported to me that I have sinkhole activity at my home.  However, they claim they are not going to pay my claim because I “lied” on my application by not telling them that I knew there was a sinkhole (repaired) next door.

I did not know this until after we closed on the house and paid the premium.  Can they do this?

Your insurance company’s stance

Essentially, the insurance company is taking a position that they want to cancel or “rescind” your policy because you failed to provide information that you either knew they wanted or should have known to disclose.

Honestly, in my experience, these defenses are about as thin as they come.  Not a defense I would make when I represented insurance companies.  Here are the issues you are dealing with when an insurance claim asserts what is commonly referred to as an “MMR” defense to your claim, which stands for “material misrepresentation” on the application.

Why?  Because most insurance applications ask you to provide very specific information, such as “are you aware of any sinkhole activity on an adjacent property?”  If you checked “no,” and that was the truth, they have no defense and should pay your claim.

Your next steps

Most of the time, when an insurance company tries to deny a claim such as this, they do this to you after you make the claim with their lawyers in tow.  In essence, the insurance company got your claim, and then, after taking your premiums for as long as they have, decided to really look to see if they wanted to pay you.

Ask them to see your application, as most people have not actually retained a copy of their insurance application.  Engage your insurance agent in the process, by asking for his/her help.

Oftentimes, insurance agents are involved in the application process and can look to clear up these issues.  However, I can tell you that I am currently representing several homeowners who are in your shoes so it may be necessary to retain a sinkhole attorney.

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