How Misrepresentation Can Void Your Insurance Policy – A Must-Read

How Misrepresentation Can Void Your Insurance Policy – A Must-ReadA court decision in Tennessee regarding a homeowners’ insurance policy recently caught our eye. We thought it was a great opportunity to talk about the concept of misrepresentation and fraud.

In the case of Conley v Tennessee Farmers, Dolores Conley brought suit against her homeowners insurance company, requesting they pay her claim for damages after a house fire. Tennessee Farmers countered that because of Conley’s misrepresentation regarding a prior foreclosure, her policy was void. Tennessee Farmers alleged that misrepresentation concerning this foreclosure materially increased the risk of loss for the insurance company.

Conley explained that she was not involved in the foreclosure and her name was not on the loan for the property that went into foreclosure. However, the Court still held that misrepresentation voided the policy, because it increased the risk of loss, and whether or not she did it intentionally was irrelevant.

Understanding misrepresentation

This case is an interesting lesson in misrepresentation in insurance policy applications. In the insurance industry, misrepresentation is a false statement on an application for insurance coverage that, if told truthfully, would affect the company’s decision on issuing the policy.

Although misrepresentation doesn’t necessarily void a policy, Tennessee law (T.C.A. § 56-7-103 ) reads as follows:

  • 56-7-103. Misrepresentation or warranty will not void policy Exceptions. No written or oral misrepresentation or warranty made in the negotiations of a contract or policy of insurance, or in the application for contract or policy of insurance, by the insured or in the insured’s behalf, shall be deemed material or defeat or void the policy or prevent its attaching, unless the misrepresentation or warranty is made with actual intent to deceive, or unless the matter represented increases the risk of loss.

The “unless” is the important part here. In the case above, the Court pointed out that the misrepresentation increased the risk of loss, rendering the policy void.

Whether a misrepresentation is innocent or fraudulent, it can result in a denial of benefits. It’s crucial you understand the terms of your policy and complete your application truthfully.

However, it’s not uncommon for claims to be wrongfully denied for misrepresentation. Maybe the questions on the application were confusing or vague. Perhaps your agent didn’t ask you all of the questions. An experienced Tennessee insurance dispute attorney can work with you to find out why.

If you have any questions or concerns about your policy or need legal assistance, the Tennessee insurance dispute attorneys at McWherter Scott & Bobbitt can help. Talk to Brandon McWherter, Clint Scott, or Jonathan Bobbitt for smart and honest representation. Call us today at 731-664-1340, or fill out our contact form. We maintain offices in Nashville, Chattanooga, Memphis, Jackson and Knoxville.