Long ago, when you filled out your property insurance application, you probably included some personal information you normally do not share with others: criminal records, social security numbers, past experiences with other insurance companies, etc. Insurance companies routinely ask for this type of information to assess whether or not they want to provide insurance for you. You may think that concealing some information may improve your chances to obtain insurance, and you may be right. But doing so might place you in a bad position if and when you file a claim. And the recent decision in Texas Farm Bureau v. Rogers explains why.
In Texas Farm Bureau v. Rogers, 04-10-00546-CV (Tex.App.—San Antonio, July 27, 2011), the Texas Fourth Court of Appeals was presented with an insurance lawsuit that involved concealment by the insured. In 2008, the homeowner obtained an insurance policy from Texas Farm Bureau providing $160,000 of coverage for her dwelling and $96,000 for her personal belongings inside her home. On January 14, 2009, a fire completely destroyed the insured’s home and all of its contents. The insured made a claim on the policy, and Texas Farm Bureau (“TFB”) quickly began a criminal background check on the insured, as well as a cause and origin investigation on the claim. A few days later, TFB obtained the insured’s criminal record, which included convictions for DWI, public intoxication, theft, assault, and forgery, as well as numerous probation violations. TFB’s underwriting manager became aware of the insured’s criminal record and decided to rescind the insured’s policy. In early February, TFB sent notice to the insured that it was rescinding the policy as of the original application date and returning the insured’s premium payment based on the concealment of her criminal record on the policy application.
The policy contained a provision stating:
2. Concealment or Fraud. This policy is void as to you and any other insured, if you or any other insured under this policy has intentionally concealed or misrepresented any material fact or circumstance, made false statements or committed fraud relating to this insurance, whether before or after a loss.
In its letter to the insured, TFB stated that
“[D]ue to the material misrepresentation on the original application concerning your prior criminal convictions[, w]e consider the above contract null and void…”
At the trial level, the jury found that TFB had ratified the insurance policy, making it enforceable. TFB appealed the jury’s finding to the Fourth Court of Appeals. In its appeal, TFB argued that the insurance policy could not have been ratified because the contract was void based on the insured’s misrepresentation. TFB contended that the jury’s finding that it ratified the insurance contract with the insured was immaterial and had no legal basis.
The Fourth Court of Appeals noted that aside from concluding that TFB ratified the insurance policy, the jury also concluded that the insured made a material misrepresentation. And because the jury found that the insured made a material misrepresentation in her policy application, “the policy was void and could not be ratified. Therefore, the jury’s finding that Farm Bureau ratified the insurance contract was immaterial and will not support an award of damages and attorney’s fees.”
So take the court’s ruling in Texas Farm Bureau v. Rogers as a cautionary tale. Even though it may seem like a good idea to conceal certain facts on your insurance application, in the long run, it may prove to be a very, very bad idea.