Misrepresentations on Your Insurance Application Can Result in Denial of Claims
In a recent appellate case, Freeze v. Tenn. Farmers Mut. Ins. Co., the Tennessee Court of Appeals again analyzed the effect of misrepresentations in applications for insurance. The Court began by referencing Tenn. Code Ann § 56-7-103), which provides that misrepresentations on an application will not void the policy unless the misrepresentation is made with actual intent to deceive, or unless the matter represented increases the risk of loss. The latter, whether the misrepresentations increases the risk of loss, was the focus of the Freeze court.
Tennessee courts have previously noted that a misrepresentation in the application increases the risk of loss “when it is of such importance that it naturally and reasonably influences the judgment of the insurer in making the contract.”
In other words, if the insurance carrier had known the truth, would it have decided that the risk of having to pay for an insurance loss was too great to offer coverage?
In ruling that the insureds’ insurance policy was void as a result of misrepresentations, the Freeze court made three findings that essentially affirm dozens of prior appellate cases:
- First, it determined that whether the misrepresentation increased the risk of loss was a question of law (not fact) for the Court to decide.
- Second, whether the applicant actually read the application before it was signed was not determinative. If the applicant signed the application, he/she is presumed to have read it.
- That misrepresentations of any of the following did “increase the risk of loss.”
- Are there any pending legal actions?
- Has the applicant been charged or convicted of felony crimes?
- Has the applicant been charged or convicted of arson, fraud, theft, or drug related crimes?
Although there is certainly nothing earth-shaking about the Freeze opinion, there are a couple of things that are worth noting. First, just because the insured is presumed to have read an application, the policyholder may still have options for recovering against an insurance agent if the agent caused the application to be incorrect. For example, if the agent told the applicant that he did not have to disclose a pending legal action and the applicant relied on that advice, then the agent is exposed to liability if a claim is later denied. Further, an agent’s knowledge is imputed to the insurance company. Second, not every felony or other crime is “material.” For example, if a 55-year-old applicant was charged with theft when he or she was 18, then a court might determine that such was not “material.” In the Freeze case, neither of these nuances were present as the insured had numerous criminal charges that were very recent and even some that were actively pending, none of which were disclosed.
Insurance companies will try every argument they can to defeat your claim. McWherter Scott & Bobbitt understands the law and keeps current with the most recent court decisions. Our Tennessee insurance dispute attorneys help policyholders contest improper denials, and work to get our clients the benefits to which they are entitled. For help with your insurance policy claim, please call 731-664-1340, or use our contact form to get answers and strong representation from Brandon McWherter, Clint Scott or Jonathan Bobbitt. We have offices in Nashville, Chattanooga, Memphis, Jackson and Knoxville.
Brandon McWherter has dedicated his practice to assisting insurance policyholders with their claims against insurance companies, including claims for bad faith. He is licensed in Tennessee, Arkansas, and Mississippi. Learn More