Caselaw Wednesdays – My Florida insurance policy was canceled because of an alleged misrepresentation, now what?

When applying for insurance, you need to be careful to not give untruthful answers on the application. If you do, the insurance company can rescind the policy – they can return your premiums, cancel the policy, and not pay on any claims. The law governing rescission in Florida can be found in Florida Statutes 627.409. 

Florida’s 3rd District Court of Appeals applied this law in Nembhard v. Universal Property and Casualty Company. The Nembhards purchased homeowners insurance with Universal. The application asked if they had any claims within the past 5 years. They answered that they did not. In fact, they had two water loss claims with a previous insurer in the past two years. The Nembhard’s home was damaged by Hurricane Matthew. They filed a claim with Universal, were not satisfied with how much Universal paid, and sued. In the course of the lawsuit, the prior claims were discovered. Universal rescinded the policy.

Were they allowed to do that? The court answered yes. The primary issue was whether the misstatement was material. A misstatement is material if an insurer would have altered the policy’s terms had it known the true facts, or if the misstatement materially affects risk. Universal claimed it would not have issued the policy at all if it had known there were prior claims. Because the misstatement was material, Universal could rescind the policy.

It is important to note that the misstatement does not have to be fraudulently or knowingly made to allow an insurer to rescind. Even if the misstatement is made by an honest mistake, if the insurer would have altered the policy’s terms had it known the true facts, or if it materially affects risks, the misstatement is material, and the insurer can rescind the policy. 

Florida law does provide some limits. Florida Statutes 627.409(3) provides that, once a homeowners or renters insurance policy (or other residential property insurance) has been in effect for 90 days, it cannot be rescinded on the basis of credit information available in public records. However, that is the only exception.

So be careful when filling out an insurance application. Make sure all information being provided is accurate. If you make a misstatement, and the insurance company finds out, you can find yourself without coverage. It does not matter if you filled out your application or if your agent did, once you sign that application, those statements are your representations and accuracy is very important.

Has your insurance company rescinded your policy after you’ve had a loss? Contact the attorneys at Alvarez Law Group for a free claim review and to determine your rights.

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