A manufacturing company applies for a commercial general liability policy. The risk manager answers all questions on the application to the best of their knowledge. Later, the insurer discovers that some of the information provided was incorrect. In order for the insurer to legally void the contract based on misrepresentation, which of the following conditions must be satisfied? (Select all that apply)
- The false statement must be material to the insurer's acceptance of the risk.Cevap
- The insurer must have relied upon the misstatement when making the underwriting decision.Cevap
- CThe applicant's statement must be classified as an absolute warranty rather than a representation.
- DThe insurance producer must have unilaterally amended the application to correct the error prior to submission.
Cevap
The false statement must be material to the insurer's acceptance of the risk, and the insurer must have relied upon the misstatement when making the underwriting decision.
For an insurer to legally void an insurance contract based on a misrepresentation, the false statement must be material to the risk (meaning the insurer would have altered the terms, raised the premium, or denied coverage had the truth been known) and the insurer must have actually relied upon it during the underwriting process.
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Statutory criteria for voiding a policy based on misrepresentation (Materiality and Reliance)