What is a material misrepresentation on an insurance application
Coverage Q&A: Withholding information on an insurance application could mean the difference between a claim being paid or not.
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Editor’s Note: This week’s question asks about material misrepresentation on an insurance policy application.
Question: An agent fills out an application for a direct writing carrier on a property risk. On the application, questions are asked about prior cancellations. The only cancellation was initiated by the insured for non-payment of a premium of a prior policy. It was not a cancellation for any underwriting reasons.
Is the failure to answer that question material, as the cancellation was not for underwriting reasons but simply for the insured’s non-payment of premium?
— Pennsylvania Subscriber
Analysis: It is never wise to skip questions on an application or to withhold information requested on the insurance application. While some carriers will overlook some small discrepancies, knowing that sometimes information is not readily available or a small claim may have been forgotten. However, when it comes to information that an insurer relies upon to accept or reject a risk or substantially affect the premium, the application must be completed with as much information and as completely as possible. It could mean the difference between a claim being paid or not if the insurer finds the information out after a loss.
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