Misrepresentations in Applications for Insurance Coverage

When completing an application for life, health or disability insurance coverage, an insurance company will ask a broad array of questions designed to determine whether an individual is a good risk and the type of coverage that should be issued. It is important to carefully complete the application form to make sure that all of the answers are 100% accurate; otherwise, the insurance company may later deny your claim. Unfortunately, many people do not find out that they failed to disclose important information on the insurance application until a claim is submitted. The insurance company then denies the claim contending that the insured made a material misrepresentation in the application because the insured failed to disclose important information such as a previous health condition or by their failure to answer “yes” to questions which were answered “no.” If the misrepresentation is material to the insurer issuing coverage, the insurance company has the right to deny the claim, rescind the policy and refund the premiums that have been paid.

The falsity of any statement in the application for any policy may not bar the right to recovery thereunder unless such false statement materially affected either the acceptance of the risk or the hazard assumed by the insurer. (IC 27-8-5-5(c)). False representations on an insurance application made by an insured concerning a material fact, which mislead, will void an insurance contract, just as in any other contractual relationship, regardless of whether the misrepresentation was innocently made or made with fraudulent intent. Ruhlig v. American Community Mut. Ins. Co., 696 N.E.2d 877, 880 (Ind. Ct. App. 1998) citing Watson v. Golden Rule Ins. Co., 564 N.E.2d 302, 304 (Ind. Ct. App. 1990); American Family Mut. Ins. Co. v. Kivela, 408 N.E.2d 805, 810 (Ind. Ct. App. 1980); Bennett v. CrownLife Ins. Co., 776 N.E.2d 1264 (Ind. Ct. App. 2002); Jesse v. American Community Mut. Ins. Co., 725 N.E.2d 420 (Ind. Ct. App. 2000).

An applicant, who signs an application for insurance containing material misrepresentations, is chargeable with the knowledge of the false statements and must be held to have adopted them as his or her own. Jesse v. American Community Mut. Ins. Co., 725 N.E.2d 420 (Ind. Ct. App. 2000). A representation is material if the fact omitted or misstated, if truly stated, might reasonably have influenced the insurer in deciding whether to reject or accept the risk or charge a higher premium. Bush v. Washington Nat’l Ins. Co., 534 N.E.d2d 1139, 1142 (Ind. Ct. App. 1989), trans. denied; Bennett v. CrownLife Ins. Co., 776 N.E.2d 1264 (Ind. Ct. App. 2002); Fricke v. Gray, 705 N.E.2d 1027 (Ind. Ct. App. 1999). Also from Bush: the test in determining whether a policy may be avoided due to misrepresentation in the application is not whether the fact or facts misrepresented increased the chances of events insured against or increased the potential liability undertaken, or had a direct causal relationship to the event insured against, but whatever the fact or facts, if truly stated, might reasonably have influenced the insurer in deciding whether it should reject or accept risk. Whether a misrepresentation is material is normally a question of fact, unless the evidence is such that there can be no reasonable difference of opinion. American Family Mut. Ins. Co. v. Kivela, 408 N.E.2d 805, 810 (Ind. Ct. App. 1980).

In Ruhlig v. American Community Mut. Ins. Co., 696 N.E.2d 877, 880 (Ind. Ct. App. 1998) a middle-aged smoker made “material” misrepresentations in her application for medical insurance by failing to disclose in her responses to questions about her medical history and general health that she had been diagnosed with COPD, pulmonary fibrosis, and lumbar disc disease, had been prescribed several medications, and had seen physicians about her conditions, where the insurer’s underwriting manual and an underwriter’s affidavit established that the policy would not have been issued had she responded truthfully; thus, the insurer could rescind the policy. In Watson v. Golden Rule Ins. Co., 564 N.E.2d 302 (Ind. Ct. App. 1990), the court found that material misrepresentations were made on the application for health insurance and ruled for the insurer. In Watson, the court accepted an affidavit from the senior underwriter at Golden Rule indicating that a policy would not have been issued to the insured had his alcoholism and drug addiction been disclosed on the application.

If your claim has been denied, and your policy canceled, due to the insurance company alleging that there is a material misrepresentation on your application for health, life or disability coverage, contact the O’Ryan Law Firm at (855) 778-5055.