You see it on most applications, in most policies, and on most claim forms, a statement regarding material misrepresentation, and that any material misrepresentation may be considered a fraudulent, if not criminal, act in certain states. However, what exactly is material misrepresentation? As is often the case with insurance, it can become a matter of degree.

Merriam Webster online defines material as having real importance or great consequences; something that is material is not just an overlooked detail, but a significant fact that can affect the outcome of a claims decision. Misrepresent is defined as to give a false or misleading representation, usually with an intent to deceive or be unfair. A misrepresentation is often a lie of commission or omission. An example of a lie of omission is failing to tell the insurer that you installed a swimming pool. An example of a lie of commission is saying that a sober passenger was driving when in fact the driver was the inebriated insured. Putting the two together, a material misrepresentation is a statement made by someone with an intent to deceive or mislead another party, with information that is significantly important to the issue at hand.

While an application may state that material misrepresentation is a criminal act in certain states, it doesn't necessarily specify consequences. Those consequences appear in the policy language. The ISO Commercial Property Conditions states that coverage is void in any case of fraud, or if any party intentionally concealed or misrepresented a material fact concerning coverage parts, covered property, interest in the property or a claim under the coverage. The ISO Homeowners Policy states that coverage is not provided if an insured has, before or after a loss, intentionally concealed or misrepresented any material fact or circumstance, engaged in fraudulent conduct or made false statements. It also states that if a material misrepresentation were made that would have caused the carrier not to issue the policy, the policy may be cancelled. Other policies contain similar language as well. Some states even use the concept of material misrepresentation in their statutory definition of insurance fraud.