What is material misrepresentation in insurance?
When filing an insurance claim, it might be a shock to be informed that your insurance company is attempting to assert a material misrepresentation defense against you, instead of interviewing you about your claim. So what is material misrepresentation in insurance? Should you be concerned?
When your claim can be canceled
In the state of Florida, an insurance company may rescind (or cancel as though it never existed) your insurance policy if they determine you have mispresented the underlying facts of your home and its history. If your insurance company believes that you withheld facts from them that would either cause them to deny your policy or charge you a higher premium, they can state they are not obligated to cover your claim or even your policy.
While this is a scary thought, keep in mind that while they may feel this is within the realm of possibilities, they must prove that you purposefully lied to them, and this is very difficult. This is because they must prove that you specifically told them something in your description of your home that was untrue.
What qualifies as lying?
This is where you’re likely in luck. As aforementioned, they must prove that you reported something that was untrue. Therefore, if your home had prior sinkhole damage but you didn’t know, you cannot be held liable for this information.
Second, you cannot be held liable for information that the insurance company did not ask for. If, for example, you were aware of a sinkhole that had opened next door to the house, but the insurance company never asked if there was a sinkhole next door, you cannot be held responsible for the insurance company’s negligence. It was their duty to get a well-rounded picture of your home, not yours!
Third, only information that has been confirmed and stated can be used against you. For example, if someone advised that “you better have that checked out” in reference to a crack in the foundation, it does not state that there are any issues with the foundation, nor any history of issues. There is no reason to expect a layperson to understand what a crack in the foundation might mean so it cannot be assumed that you withheld information.
Your home’s background is the insurance company’s responsibility
The basic idea is that material misrepresentation in insurance cannot be claimed about information that your insurance company did not directly ask you for. As long as you answered all the questions that were presented to you to the best of your ability, you have no reason to be concerned about your claim or policy being canceled.
While insurance applications tend to be ambiguous and poorly written, it must be proved that you outright lied in order to confirm material misrepresentation, and this is very difficult to do.
Once they press you for whether or not you told them any particular facts about the home, questions like the following arise:
- Did they inspect the home?
- Was the appearance of the damage normal for homes of its age?
- Did you buy the home for a reasonable value?
If you bought the house at its actual market value and later it is determined the damage was sinkhole related, who would believe you would do this intentionally?