Five tips to make sure your insurance coverage is not voided:
- When you are shopping for insurance coverage be sure to carefully read the underwriting section of the application.
- Don’t assume your insurance agent has filled out the correct information for personal questions, including your financial background and prior insurance.
- Don’t assume your insurance agent has filled out the correct information for questions asking about fences, trampolines, diving boards, dogs, etc.
- Accurately and honestly answer these “underwriting questions.”
- If your insurance company says they will only offer coverage to you if you remove a liability to your property, they mean it.
Take a look at the case of Lawrence and Susan Pope and learn from their loss.1
When shopping for insurance, Mr. and Mrs. Pope followed tips 1 and 3. They carefully read and honestly answered the underwriting questions on their application with Mercury Indemnity Company of Georgia, but their insurance policy was voided.
Here is how it happened. On the application:
[T]he Popes indicated that they had a swimming pool, a diving board, and a trampoline. In conjunction with that application, Mrs. Pope wrote a check for the premium and executed two policy form endorsements. One of those endorsements excluded policy coverage for liability arising out of the ownership or use of the trampoline and the other excluded coverage for losses caused by dogs. Pursuant to this application, Mercury issued Homeowner’s Policy Number GH 38000694 (“the Policy”) to the Popes, with effective dates of July 13, 2004 to July 13, 2005.
On August 20, 2004, an underwriter at Mercury sent a notice to agent Woodworth informing him that a cancellation notice was being mailed on the Policy “due to the insured having a diving board and a trampoline.”
The agent spoke with the Mercury underwriter, who agreed that Mercury would reinstate the Policy upon receipt of the trampoline exclusion and a picture of the Popes’ swimming pool with the diving board removed.
The agent then told the Popes that to keep their insurance in effect, they would need to remove the diving board from their swimming pool and provide him with photographic proof of the board’s removal, which he would then send to Mercury. Mr. Pope then took down the diving board, took a picture of his swimming pool with the diving board removed, and provided that picture, together with the premium-refund check, to the agent, who forwarded those documents to Mercury. Mercury then reinstated the Second Policy, effective September 3, 2004.
In the case, Mr. Pope and another employee of the insurance agency testified that the agent had explained that if the diving board was replaced that there would be no coverage under the policy for a claim related to the use of the diving board.
At some point in time, Mr. Pope replaced the diving board.
In July 2005, the property was significantly damaged a tornado. The Popes made a claim under the policy for the tornado damage. Mercury sent a claims adjuster to the Popes’ residence. The claims adjuster took pictures of the damage, and one of those pictures showed the swimming pool with the diving board reinstalled. Mercury thereafter initiated the current action, seeking to rescind the policy based upon the Popes’ material misrepresentation that they had permanently removed their diving board. The Popes filed a counterclaim, seeking coverage under the Policy for the tornado damage to their property as well as damages for bad faith and attorney fees.
Mercury was successful in bringing a summary judgment against the Popes and the court agreed that the unrefuted evidence in this case showed that the presence (or absence) of a diving board on the Popes’ property was material to Mercury’s decision as to whether to insure the Popes. The evidence showed Mercury originally cancelled the Policy because of the presence of the diving board, and agreed to reinstate the same only after receiving proof that it had been removed.
The Popes appealed the trial court decision but the appellate court affirmed the ruling and made three points in its decision.
- The agent was not a representative of Mercury Insurance and his statements could not bind the company.
- The evidence also showed that the Popes made the material misrepresentation regarding the removal of their diving board in an effort to have the policy reinstated. Specifically, the record reflected that the Popes removed their diving board and provided photographic proof of that removal in September 2004, after the Popes would have received the notice informing them their policy was being cancelled. And, after that time the Popes were aware that their insurance with Mercury remained in effect. This evidence was sufficient to establish that the Popes participated in the reinstatement process and, in doing so, made a material misrepresentation to Mercury—i.e., that the diving board had been permanently removed.
- “The Popes nevertheless contend that the trial court erred in granting summary judgment to Mercury because the misrepresentation regarding the removal of the diving board was not in their application for insurance. To the contrary, that application showed that the Popes did have a diving board. This argument, however, ignores the plain language of OCGA § 33-24-7(a), which provides that material misrepresentations will bar coverage where they are made either “in any application for an insurance policy … or in negotiations for such.”
Diving boards and tornado damage have nothing to do with each other and it doesn’t make sense that having a diving board would stop you from having coverage for a wind event like a tornado but the court disagreed. The Court looked at the language of OCGA § 33-24-7(a), and the notice provided by the insurance company that specifically said because of the existence of the diving board the insurer was cancelling the policy.
Different jurisdictions have different laws and different interpretations, but it is very important to understand what actions can preclude you from having coverage and it is always important when shopping for insurance to read the application and make sure it is 100% accurate.