Insurance and Risks of Misrepresentation
When you apply for insurance, you have a duty to disclose all relevant information and be honest in answering every question. Failing to do so can amount to misrepresentation which may lead the insurer to void the policy or deny you coverage.
Material misrepresentation simply means failing to report or falsely reporting any important information that would prevent the insurer from properly assessing the risks of insuring the policy holder.
Voiding the insurance policy means that the insurance contract was invalid from its inception. This is because from the very beginning, the policy holder failed to provide the information that the insurer required to assess the risks of insuring him or her. Even if the insurer does not void the policy, the insurer may still deny coverage based on material misrepresentation.
The insurer may also refuse to defend the insured in a lawsuit. A lawsuit starts by the plaintiff making certain allegations against the defendant in a document called the Statement of Claim. If these allegations fall within the scope of the coverage in the insurance policy, the insurer will have a duty to defend the named defendant in the lawsuit. This means covering all legal expenses.
However, if the policy holder has materially misrepresented, the insurer may refuse to defend its policy holder when he or she gets sued. This means the policy holder will be personally responsible for the lawsuit instead of the insurance company.
For these reasons, it is very important to be truthful to your insurance company, and provide them with all relevant information. Failing to do so can result in disastrous and unknown consequences.
About the Authors
Ben enjoys the complexities of personal injury litigation and finds the cases that require creative thinking the most gratifying. His practice is exclusively devoted to representing clients with brain injuries, spinal cord injuries, and severe orthopaedic injuries.