Homeowner Insurance Applications - Take Them Seriously

March 09, 2011

Homeowner Insurance Applications - Take Them Seriously

Almost every homeowner, and many renters, at one time or the other have applied for homeowners or renter's insurance. Depending upon one's locale, this process can be quite informal (sometimes a realtor or mortgage broker takes care of matters) and is often more of a pleasant meeting between salesperson and insurance consumer than what it really should be considered: a critical step in determining the insurability of the applicant and the item or items to be insured. Many states have specific statutes which deal directly with the issue of insurance applications. According to some, even unknowing or unintentional misstatements of fact on an application, which are material to the insurance company's undertaking of the risk, may be sufficient to avoid coverage "ab initio" (from the beginning) at the very time an insured most needs the protection.

While laws vary from state to state, it is fundamental that persons who enter into a contract must not misrepresent material facts impacting the agreement. In Florida, there is a statute, Florida Statute ?627.409, which provides that any misstatement, misrepresentation, omission, or concealment may be sufficient to allow an insurance company to refuse to pay a claim if such misstatement, etc. is either material to the acceptance of the risk or, the insurance carrier, in good faith, would not have issued the same policy or at the same premium rate. What you don't know CAN hurt you!

Difficulties arise when an applicant is less than careful with his or her answers, allows a third party such as a realtor to apply, or the insurance agent taking the application is more concerned about making a sale than providing the insurance carrier's underwriting department with the appropriate information. To further complicate the issue, over the past several years a few predatory insurers have emerged with questions on the application which have nothing to do with homeowners insurance, but which may be utilized to trap the unsuspecting insured. The insured may not know there is a problem until years later when he or she has a loss. Unlike some types of insurance (life insurance is an excellent example) there is typically no limited contestibility period for misrepresentations in a property insurance application. While this varies from state to state, as do the specifics of what type misrepresentation may be sufficient to void coverage, the careless insurance applicant may find he or she has purchased nothing if the application for insurance contains critical errors. Worse yet, such issues rarely arise until after a loss occurs.

An applicant for insurance should treat the signing of an application for insurance with the same care as he or she would signing a promissory note, a mortgage, an income tax return or any other document where the signature binds that person. Most insurance applications which require signature have preprinted information on the page which indicates the applicant, by signing, is verifying that all the answers set forth in the application for insurance are true and correct. If an insurance applicant cannot verify the answers are true and correct, he or she should not sign that application form until the issue has been resolved. If the insurance applicant provides an answer and the agent indicates a different answer should be placed on the application in order to get the applicant covered or get a better premium, and if that agent assures you that it is "okay", the best advice is to go as quickly as possible to another agent. Often, agents act as independent agents and in some states are deemed to be the agent of the consumer and in others the agent of the insurance carrier. In yet other states, the agent can be the agent of the insurance carrier or the insured, depending on the circumstances. It is never advisable to knowingly sign an insurance application which contains incorrect information, even if the agent tells you to do so. Most states have "insurers of last resort" from whom you can purchase insurance even with derogatory information, such as prior losses, bankruptcies, credit issues and so forth.

If you have a claim and you believe your insurer is raising issues regarding the application, you should immediately seek the advice of knowledgeable legal counsel. Too many people, when questioned about the application process by their insurer, state they do not remember what occurred. Often, this absence of memory is because the insured has not tried to piece together the conversation which led to the signing of the application for insurance. This is a serious matter and should at all times be treated seriously. Some insurance companies instruct adjusters in the initial taped interview with insured (following a loss) to ask certain background questions from the application to determine whether a possible misrepresentation exists. Some of these same insurers immediately run a background check on an insured to search for judgments, bankruptcies, convictions, liens and other information which might be turned into a defense to the insured's claim. This investigation almost never occurs at the time of underwriting (and practically, due to expenses, it could not) and thus it is at this critical moment when the insured needs protection that the application issue arises.

The next time you apply for homeowners or renters insurance, do it personally; take the entire application from the agent (it is typically completed on a computer and then printed out for your signature) and read it. Do not simply sign where the agent tells you to sign by the "X". Do not limit your review only to the signature page. It is the agent's job to sell insurance and, sometimes, agents will take shortcuts. It is your job to ensure the information on the application is correct if your signature is to be placed on the line which verifies this. This is no time to be lazy.

Article provided by Tyler & Hamilton, P.A. Visit us at http://www.floridainsurancelawyers.com