State-By-State Survey of Material Misrepresentation Law in Property Claims

STATE-BY-STATE SURVEY OF MATERIAL MISREPRESENTATION LAW IN PROPERTY CLAIMS:

IS RELIANCE REQUIRED FOR DENIAL?

OHIO KENTUCKY INDIANA MICHIGAN FLORIDA WEST VIRGINIA

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Difference in misrepresenting Reliance State Source during Misrepresentation in Application Misrepresentation in Claim Required? application or in claim? Before loss, a misrepresentation After loss, a Ala.Code 1975 § 27-14- must be material to an increase in misrepresentation need 28; American Fire & Cas. the risk of loss and must be relied on only be made with the Alabama Yes Co., Inc. v. Archie, 409 Yes by the insurer to its prejudice. actual intent to deceive and So.2d 854 be related to a matter which (Ala.Civ.App.1981). is material. AS § 21.36.210; AS § If there is a fraudulent and material 21.42.110; Bennet v. misrepresentation made on the Alaska No No Hedglin, 995 P.2d 668 claim, the insurer may reject (Ak. 2000). coverage. Ariz.Rev.Stat.Ann. 20- An insurer may not deny coverage 1109; Valley Farms, Ltd. under a policy unless the insurer can v. Transcontinental Ins. prove that all three conditions of § Arizona No Co., 206 Ariz. 349 (Ct. No 20-1109 have been satisfied. App.2003).

A.C.A. § 23-79-107; Insurance policy will be void if a Twin City Bank v. Verex material misrepresentation, which Assur. Inc., 733 F.Supp. Arkansas Yes No was relied upon by the insurance 67 (1990), Cincinnati Life company, is made on the application Ins. Co. v. Mickles, 85 for the coverage. Ark. App. 188 (2004).

Cal.Ins.Code § 359; LA Reliance is not required to void a Sound USA, Inc. v. St. policy ab initio for application fraud, California No Paul Fire & Marine Ins. No only that the policyholder concealed Co. (App. 4 Dist. 2007) or misrepresented a material fact on 156 Cal.App.4th 1259. an application. The insurer must prove that (1) the applicant made a false statement of fact or concealed a fact in his application for insurance; (2) the applicant knowingly made the false statement or knowingly concealed the fact; (3) the false statement of fact or the concealed fact materially Hollinger v. Mut. Ben. affected either the acceptance of Life Ins. Co., 192 Colo. Colorado Yes N the risk or the hazard assumed by 377 (1977). the insurer; (4) the insurer was

ignorant of the false statement of fact or concealment of fact and is not chargeable with knowledge of the fact; (5) the insurer relied, to its detriment, on the false statement of fact or concealment of fact in issuing the policy.

1 An insurer who raises the special defense of concealment or misrepresentation does not have to Rego v. Connecticut Ins. prove that the insurer actually relied Placement Facility, 219 Connecticut No No on the concealment or Conn. 339 (1991). misrepresentation.

An insurer must prove that the 18 Del.C. § 2711; Grand insured must have known or had a Delaware No Fraternity v. Keatley, 27 No reason to know of the falsity before Del. 308 (Del. 1913). rescinding an insurance contract under a misrepresentation theory. The insurer does not need to Fla. Stat. Ann. § 627.409; “demonstrate that it relied on the Biscayne Cove insured's misrepresentations when Condominium Ass'n., asserting a policy defense based on

Florida No Inc. v. QBE Ins. Corp., No fraud; that a material fraud was S.D.Fla. No. 10-23728- perpetrated by an insured in CIV (June 12, 2013). pursuing an insurance claim is sufficient.”

Ga. Code Ann. § 33-24-7; Where a policy so provides, material Blitch Ford, Inc. v. MIC misrepresentations alone, are Georgia No Prop. & Cas. Ins. Corp., No sufficient to void a policy. 90 F. Supp. 2d 1377 (M.D. Ga. 2000). There must be (1) a representation of a material fact, (2) made for the HRS § 431:10-209; purpose of inducing the other party Matsuura v. E.I. du Pont to act, (3) known to be false but Hawaii Yes No de Nemours & Co., 102 reasonably believed true by the Haw. 149 (Haw. 2003). other party, and (4) upon which the other party relies and acts to [his or her] damage. Idaho Code Ann. § 41- 1811, § 41-293; Wardle Idaho No No v. Int'l Health & Life Ins. Co., 97 Idaho 668 (1976). No proof of fraud or detrimental ILCS 5/154; Barth v. reliance was required. Instead, State Farm Fire and Cas. insurer had to show plaintiff Illinois No No Co., 371 Ill. App. 3d 498 misrepresented or concealed a (2007). material fact to void the policy.

A material misrepresentation or omission of fact in an insurance Allied Prop. & Cas. Ins. application relied on by the insurer Indiana Yes Co. v. Good, 938 N.E.2d No in issuing the policy, renders the 227 (Ind. Ct. App. 2010). coverage voidable at the insurance company's option.

2 Rubes v. Mega Life And Reliance is required for insurer to Iowa Yes Health Ins. Co., Inc., 642 No succeed in equitable rescission and N.W.2d 263 (Iowa 2002). equitable estoppel. An insurer who raises the defense of concealment or misrepresentation Pink Cadillac Bar & Grill, does not have to establish that it Inc. v. U.S. Fid. & Guar. Kansas No No actually relied on the concealment Co., 22 Kan. App. 2d 944 or misrepresentation or that it (1996). suffered an injury.

Ky.Rev.Stat.Ann. 304.14- 110; Hornback v. Bankers Life Ins. Co., 176 Insurer must rely on S.W.3d 699 (Ky. Ct. App. misrepresentation to succeed on Kentucky Yes No 2005); State Farm Mut. fraudulent misrepresentation Auto. Ins. Co. v. Crouch, action. 706 S.W.2d 203 (Ky. Ct. App. 1986). La. Rev. Stat. Ann. § 22:860; Talbert v. State The insurer must only establish that Farm Fire & Cas. Ins. Co., these misstatements materially Louisiana No No 971 So. 2d 1206 (La. affected the risk assumed by the App. 4 Cir. November 4, insurer. 2007).

Me.Rev.Stat. Title 24-A, 2411; N. E. Ins. Co. v. Young, 2011 ME 89, 26 An insurer must show actual Maine Yes A.3d 794. No reliance in order to rescind a policy for misrepresentation in application.

Prince George's Cty. v. Insurer may deny claim for Local Govt. Ins. Trust, material misrepresentation 388 Md. 162 (2005), No misrepresentation by an insured "only if the insurer Hartford Acc. & Indem. will affect the validity of a policy establishes by a Maryland Yes Co. v. Sherwood Brands, No unless the insurer relies on the preponderance of the Inc., 111 Md.App. 94, misrepresentation in deciding evidence that the lack of (Md.App.1996), 347 Md. whether to accept the risk. cooperation or notice has 32 (1997). resulted in actual prejudice to the insurer." Mass.Gen.Laws Ann.175 An insurer need not demonstrate S. 186; Northwestern that it relied on misrepresentations Mut. Life Ins. Co. v. because under Massachusetts law Massachusetts No Iannacchino, 950 F.Supp. No “reliance” is not a prerequisite for 28 (D.Mass.1997). proof of invalidation of an insurance

policy and/or denial of a claim.

3 Insured's statement is Mich. Comp. Laws Ann. § “material,” for purposes of 500.2218; Lake States Rescission is justified without regard determining whether Ins. Co. v. Wilson, 231 to the intentional nature of the insurance policy can be Mich. App. 327 (1998), misrepresentation, as long as it is voided for Michigan Yes Mina v. Gen. Star Indem. Yes relied upon by the insurer. misrepresentation of Co., 218 Mich. App. 678, material fact, if statement is (1996) rev'd in part, 455 reasonably relevant to Mich. 866, 568 N.W.2d insurer's investigation of 80 (1997). claim.

Minn. Stat. § 60A.08, Any “willful false swearing” as to any subd. 9; Collins v. USAA material article of insurance policy Minnesota No Property & Cas. Ins. Co., No prevents insured from recovering 580 N.W.2d 55 under whole policy. (Minn.App.1998).

Apperson v. United Insurer must only establish States Fidelity & Intentional misrepresentation, by that statements made by Guaranty Co., 318 F.2d the applicant for an insurance the insured were 1) false Mississippi Yes 438 (5th Cir. Miss. 1963), Yes policy, of a material fact, if relied on and 2) material and 3) Watkins v. Continental by the insurer, is ground for knowingly and willfully Ins. Cos., 690 F.2d 449 rescission. made. (5th Cir.1982). A misrepresentation is material if it Crewse v. Shelter Mut. would likely affect the conduct of a Missouri No Ins. Co., 706 S.W.2d 35 No reasonable man with respect to his (Mo. Ct. App. 1985). transaction with another.

Omission or misrepresentation on Mont. Code Ann. § 33- insurance application may be 15-403(2); Schlemmer v. material, and thus, may prevent N. Cent. Life Ins. Co., recovery under policy or contract, if, 2001 MT 256 (Mont. Montana No No had truth been known, reasonable 2001), Schneider v. and prudent insurer would not have Minnesota Mut. Life Ins. issued policy or would have issued it Co., 247 Mont. 334 at higher premium. (1991).

Under § 44–358, an insurer Neb. Rev. Stat. § 44-358; In Nebraska there is a common-law may not void a policy Glockel v. State Farm right to rescind or avoid insurance because an insured Mut. Auto. Ins. Co., 224 policies for material misrepresents proof of loss Neb. 598 (Neb. 1987), Nebraska No Yes misrepresentations, which is unless the insurer relied on McCullough v. State recognized in and limited by §44- the misrepresentation to its Farm Fire & Cas. Co., 80 358. injury. F.3d 269 (8th Cir.1996).

4 A false representation is material if Powers v. United it concerns a subject reasonably Services Auto. Ass'n, 115 relevant to the insurance company's Nevada No No Nev. 38, 42(1999). investigation, and if a reasonable person would attach importance to that fact.

New No N.H. RS 417-C:1. No Hampshire Longobardi v. Chubb Ins. An insured's misstatement is Co. of New Jersey, 121 material if when made a reasonable N.J. 530 (1990), Dawn insurer would have considered the Restaurant, Inc. v. Penn misrepresented fact relevant to its New Jersey No Millers Ins. Co., D.N.J. No concerns and important in No. CIV.A. 10-2273 determining its course of action. MLC,(Oct. 18, 2011).

N. M. S. A. 1978, § 59A- Rescission is allowed where there 18-11; Prudential Ins. Co. has been a misrepresentation of a of America v. Anaya, 78 material fact, the misrepresentation New Mexico Yes N.M. 101, 1967-NMSC- No was made to be relied on, and has in 132. fact been relied on.

Mutual Ben. Life Ins. Co. False statements in v. JMR Electronics Corp., insurance claims made with 848 F.2d 30 (2d Cir. N.Y. The materiality inquiry under New the intent to deceive 1988), Sunbright York law is made with respect to the New York Yes Yes constitute insurance fraud Fashions, Inc. v. Greater particular policy issued in reliance and can be grounds for N.Y. Mut. Ins. Co., 310 upon the misrepresentation. voiding the underlying N.Y.S.2d 760, (N.Y. App. policy. Div. 1970). N.C.G.S.A. § 58-3-10; Bryant v. Nationwide The insurance company must prove Mut. Fire Ins. Co., 329 the insured made statements that S.E.2d 333 (1985); North Carolina No No were: 1) false, 2) material, and 3) Federated Mut. Ins. Co. knowingly and willfully made. v. Williams Trull Co., Inc., 838 F. Supp. 2d 370 (M.D.N.C. 2011).

A misrepresentation in an NDCC, 26.1-29-25; application for insurance which is NDCC, 26.1-29-24; made with an intent to deceive, or NDCC, 26.1-29-24; where the matter misrepresented North Dakota Yes NDCC, 26.1-29-17; No increases the risk of loss is a ground Lindlauf v. N. Founders to avoid a policy of insurance, issued Ins. Co., 130 N.W.2d 86 in reliance upon the (N.D. 1964). misrepresentation.

5 Abon, Ltd. v. Transcon. The subject of the Ins. Co., 2005-Ohio-3052 misrepresentation need not (Ohio Ct. App. June 16, ultimately prove to be significant to Ohio No 2005), Nationwide Mut. No the disposition of the claim, so long Ins. Co. v. Skeens, 2008- as it was reasonably relevant to the Ohio-1875 (Ohio Ct. App. insurer's investigation at the time. Apr. 18, 2008).

Regarding allegations of Adams v. Nat'l Cas. Co., A misrepresentation must have false swearing, a 1957 OK 6; Long v. Ins. been relied upon by the insurer, if it misrepresentation will be Co. of N. America, 670 constitutes a ground for avoiding considered material if a Oklahoma Yes Yes F.2d 930 (10th Cir.1982). the policy. reasonable insurance company, in determining its course of action, would attach importance to the fact misrepresented.

Misrepresentations must be shown O.R.S. § 742.013; Story v. by the insurer to be material, and Oregon Yes Safeco Life Ins. Co., 179 No the insurer also shows reliance Or. App. 688 (2002). thereon.

In the context of an insurer's post-loss Information is said to be material if A.G. Allebach, Inc. v. investigation, “the knowledge or ignorance of it would Hurley, 373 Pa.Super. materiality requirement is naturally influence the judgment of 41, (Pa. Super. Ct.1988), satisfied if the false the insurer in issuing the policy, in Parasco v. Pacific Indem. statement concerns a Pennsylvania No No estimating the degree and character Co., 920 F.Supp. 647 subject relevant and of the risk, or in fixing the premium (E.D.Pa.1996). germane to the insurer's rate. investigation as it was then proceeding.

Material misrepresentation in an R.I.Gen.Laws Ann. 27-18- insurance application makes 16; Evora v. Henry, 559 voidable, without a concomitant Rhode Island No No A.2d 1038 (R.I. 1989). demonstration of fraud, an insurance contract that is issued upon the application. In order to void an insurance policy Primerica Life Ins. Co. v. for fraudulent procurement, the Ingram, 616 S.E.2d 737 insurer must show not only that the (S.C. App. 2005); United South Carolina Yes No statements complained of were Ins. Co. of America v. untrue but also that the falsity was Stanley, 289 S.E. 2d 407 known to the applicant, material to (S.C. 1982). the risk, relied on by the insurer,

6 and made with the intent to deceive and defraud the company.

SDCL § 58-11-44; De A misrepresentation “in an Smet Farm Mut. Ins. Co., application for insurance is material v. Busskohl, 834 N.W.2d to the risk if it is such as would South Dakota No 826 (N.D. 2013), No reasonably influence the decision of Fedderson v. Columbia the insurer as to whether it would Ins. Group, 2012 SD 90 accept or reject the risk.” (S.D. 2012). T. C. A. § 56-7-103; Owens v. Tenn. Rural Health Improvement Ass'n, 213 S.W.3d 283 A misrepresentation on an

Tennessee No (Tn Ct. App. 2006), No application voids the policy if it is

Matthews v. Auto made with actual intent to deceive. Owners Mutual Ins. Co., 680 F. Supp. 287 (M.D. Tenn. 1988). Insurer must plead and prove five elements: (1) the making of the Darby v. Jefferson Life representation; (2) the falsity of the Ins. Co., 998 S.W.2d 622 representation; (3) the insurer's (Tex. App. 1995), Koral reliance on the representation; (4) Texas Yes Industries, Inc. v. Sec.- No the insured's intent to deceive in Connecticut Life Ins. Co., making the representation; and (5) 788 S.W.2d 136 (Tex. the materiality of the App.1990). representation.

An insurance company cannot Utah Code Ann. § 31A- escape liability on a policy if it is 21-105 (West), Hardy v. established that there should have Utah Yes Prudential Ins. Co. of No been no actual reliance on the Am., 763 P.2d 761 (Utah applicant's misrepresentation, 1988). concealment, or omission.

Vt.Stat.Ann. Title 8, 4205 Fireman's Fund Ins. Co. A material misrepresentation in an v. Knutsen, 132 Vt. 383 application for liability insurance is Vermont No No (1974), McAllister v. grounds for declaring the policy void Avemco Ins. Co., 148 Vt. ab initio. 110 (1987). Insurer must show by clear proof that the statement on the Va. Code Ann. § 38.2- application was untrue and that the 309; Montgomery Mut. insurance company's reliance on the Virginia Yes No Ins. Co. v. Riddle, 266 Va. false statement or omission was 539 (2003). material to the company's decision to undertake the risk and issued the policy.

7 RCWA 48.18.090; Karpenski v. Am. Gen. Life Companies, LLC, 916 The insurer need not F. Supp. 2d 1188 (W.D. Misrepresentations made during establish reliance, an Washington No Wash. 2012), St. Paul No application render policy void ab essential element of fraud, Mercury Ins. Co. v. inito. in order to deny coverage Salovich, 41 Wn. App. for such misrepresentation. 652 (Wash. Ct. App. 1985).

Insurer must show that W. Va. Code, § 33-6-7; misrepresentation, omission, Massachusetts Mut. Life concealment of fact, or incorrect Ins. Co. v. Thompson, West Virginia No No statement substantially affected or 460 S.E.2d 719 (1995), impaired its ability to make Cordial v. Ernst & Young, reasonable decision to assume risk 199 W. Va. 119 (1996). of coverage.

To be entitled under the statute to W.S.A. 631.11; Pum v. rescind an insurance policy, the Wisconsin Physicians insurance company must prove: Reliance is not an element Serv. Ins. Corp., 298 either (a)(i) the insurer relied on the required to establish Wisconsin No Wis.2d 497; Tempelis v. No misrepresentation, and (ii) that material misrepresentations Aetna Casualty & Surety misrepresentation was material, or in a proof of loss. Co., 164 Wis. 2d 17 (Wis. (iii) it was made with intent to Ct. App. 1991). deceive; or (b) the misrepresented fact contributed to the loss.

Materiality in this context has been defined as a risk that would have W.S.1977 § 26-15-109; influenced a prudent insurer in White v. Cont'l Gen. Ins. Wyoming No No determining whether to accept the Co., 831 F. Supp. 1545 risk in the first place. (D. Wyo. 1993)

The foregoing represent general principles of state law - It is important you consult with our firm, or your selected legal counsel, regarding individual claims as laws may change and facts of individual claims may differ.

For more information regarding the investigation and handling of insurance fraud investigations and related litigation, please contact us at any time. www.smithrolfes.com [email protected]