Disputes over insurance coverage between carriers and insureds are not all that uncommon. Reasonable minds can differ on the meanings of policy terms, exclusions, even limits of coverage. What many folks don't realize, however, is that it also is common when coverage disputes arise for a carrier to take a close look at why it issued the policy in the first place.

Insurance carriers use the application to gather information as part of the underwriting process. They seek information relevant to the proposed risk and use the information to set premium levels. Carriers are entitled to rely upon the answers given to questions on the application.

When a coverage dispute later arises, a carrier will perform a coverage investigation. This can occur before a lawsuit being filed, during litigation, or both. An insurer often will compare the information gathered during the coverage investigation to the information originally given by the insured on the application. If the carrier determines through its coverage investigation that the insured provided false information on the original application, bigger problems than an uncovered claim could be in store for the insured.