Complete Disclosure Is Necessary When Applying For Insurance; Otherwise, You May Pay A Lot For Nothing
(Note: this Guest Blog is by Donna DeVaney, an attorney with Merlin Law Group in the Tampa, Florida, office. This is a series that she and fellow attorney Kristin Demers-Crowell are writing on sinkhole issues).
The last time I wrote, I stressed the importance of maintaining sinkhole coverage on property located in Florida and I explained the very restrictive application of catastrophic ground cover collapse coverage. Now, I want to stress the importance of properly completing the insurance application.
Most applications require the applicant to state whether there is any damage or disrepair to the property and whether there are any known sinkholes in the area. This information is important to insurance companies so they can decide whether they want to take the risk and underwrite the policy. I have seen it on far too many occasions where insureds have suffered a confirmed sinkhole loss at their home or business, but their claim is denied because of a misrepresentation on the application.
While most everyone relies on their insurance agent to fill out the application and signs the application without reading it, it is a very bad idea to do so. Everyone who signs an insurance application should read it thoroughly and make sure all information is correct at the time the application is submitted. If there is damage or disrepair at the property (i.e. cracks, etc.) or if there are any known sinkholes in the area at the time the application is filled out, this information must be disclosed. Even if you follow the advice in my last post and purchase sinkhole coverage, if you do not disclose all information on the application, the insurance company may nonetheless deny your covered claim. Don’t let that happen to you.
Be familiar with the condition of your property at the time you fill out the application and disclose all known conditions that are responsive to questions presented in the application. If you don’t, you may be buying a very big headache down the line.
Donna,
I have seen this happen to several of my clients. It is important to note that a "misrepresentation" on an application, even if inadvertent, may give insurance companies cause to deny a claim.
Keith,
That is a very good point. Even inadvertent misrepresentations on an application can prevent recovery under the policy. Please refer to Fla. Stat. 627.409, which states as follows:
Representations in applications; warranties
(1) Any statement or description made by or on behalf of an insured or annuitant in an application for an insurance policy or annuity contract, or in negotiations for a policy or contract, is a representation and is not a warranty. A misrepresentation, omission, concealment of fact, or incorrect statement may prevent recovery under the contract or policy only if any of the following apply:
(a) The misrepresentation, omission, concealment, or statement is fraudulent or is material either to the acceptance of the risk or to the hazard assumed by the insurer.
(b) If the true facts had been known to the insurer pursuant to a policy requirement or other requirement, the insurer in good faith would not have issued the policy or contract, would not have issued it at the same premium rate, would not have issued a policy or contract in as large an amount, or would not have provided coverage with respect to the hazard resulting in the loss.
Thanks for bringing up a very important point, Keith.