A few weeks ago, I wrote about a policyholder who refused to answer questions during his EUO. Hand-in-hand with that is: What if an insured gives an inaccurate answer during an EUO? The analysis should begin with the policy language – where else? Almost every insurance policy contains a fraud, misrepresentation, and concealment provision. Fraud is the willful intent to deceive. Misrepresentation is the willful act of giving information known to be incorrect. Concealment is the willful act of hiding facts or circumstances. The common thread is that all three acts must be willful.
But do all intentionally incorrect answers place an insured’s claim at risk? What if an insured was embarrassed about his age and misrepresented it when asked at the examination? Can an insurer use the incorrect answer as a basis to deny the claim? Usually no, unless it is a life insurance policy or the policyholder’s age was an important factor in the underwriting of the policy or the claim.
An incorrect answer given at an EUO must be material to the loss or the carrier’s investigation and evaluation of the claim in order for a carrier to use it to deny a claim. More than one hundred and twenty five years ago, the United States Supreme Court explained the concept of materiality.
The object of the provisions in the policies of insurance, requiring the assured to submit himself to an examination under oath, to be reduced to writing, was to enable the company to possess itself of all knowledge, and all information as to other sources and means of knowledge, in regard to the facts, material to their rights, to enable them to decide upon their obligations, and to protect them against false claims. And every interrogatory that was relevant and pertinent in such an examination was material, in the sense that a true answer to it was of the substance of the obligation of the assured. A false answer as to any matter of fact material to the inquiry, knowingly and willfully made, with intent to deceive the insurer, would be fraudulent.
Claflin v. Commonwealth Ins. Co., 110 U.S. 81, 94-95 (1884)
So there you have it: “A false answer as to any matter of fact material to the inquiry, knowingly and willfully made, with intent to deceive the insurer, would probably be considered fraudulent. In almost all circumstances, but especially when answering questions under oath, honesty is the best policy.