The information in an application for insurance is extremely important; it contains information which the insurance company uses to determine if it will extend coverage, what type and how much coverage, and is used to determine the level of risk. The accuracy of that information is important. There are different burdens of proof that an insurance company must meet if they intend to void a policy based on a misrepresentation in the application. The different standards may depend on what the language in the policy and application says and whether the insurer is an admitted carrier or a surplus lines insurer, as well as the law in your jurisdiction.

Now I’m not saying there aren’t consequences for insurance carriers that improperly try to raise these types of defenses – because some insurance carriers pull the trigger on this aggressive defense too often when they shouldn’t. But, it is not a spot that any policyholder wants to find himself; no longer a policyholder because of something on an application for insurance. A recent Southern District of Florida case discusses misrepresentations in the application and gives some description about why misrepresentation in the application is treated differently than other defenses raised by insurance companies.1

The case involves a situation where a policyholder allowed a friend to borrow his 32–foot fishing yacht for a fishing trip. The friend mysteriously disappeared and was never heard from again. The insurance company denied insurance coverage for the loss of the vessel. The jury found that the policyholder had proven his claim but could not recover because he intentionally misrepresented a material fact in his insurance application. In the case, the policyholder tried to set aside the jury verdict, arguing there was no evidence from which a reasonable jury could have found that any misrepresentations had “increased the hazard by any means within the control of the insured.” The court held that Florida law does not require that misrepresentations increase the hazard, and there was sufficient evidence for a reasonable jury to conclude that his intentional misrepresentations affected the insurance company’s ability to assess the risks it was insuring.

The court noted that with misrepresentations in an insurance application, it’s not that they increase the risk of loss, but that they interfere with the insurer’s ability to assess the risk of loss before deciding how much coverage to provide and at which premium. Here, the application listed the policyholder as the owner, that he had four years of boating experience, he would be the sole operator, and the vessel would be stored on his property. That was not true, as a second person acted as a co-owner, primarily used the boat, and did not have the boating experience. Now the policyholder could have informed the insurance carrier of this fact and they could have still obtained the policy – they just would have had to pay a different premium if they disclosed the truth.

The tip to avoid a situation like this case is to not even allow there to be inaccurate information on your insurance application. Do more than read your insurance application; double check it for accuracy and correct any inaccuracies with your agent.


1 Gamez v. Ace American Ins. Co., 2014 WL 3921366 (S.D. Fla. 2014).