Avoid pitfalls of the insurance application and claims process

Our firm recently litigated a case where a warehouse was damaged by a tornado. The damage was estimated to be around $1 Million. During the course of the investigation of the claim, the insurance company sought certain information from the insured and the insurance agent that procured the policy. The insurance company then denied coverage after it determined that the information contained in the application was false.

What transpired was a year-long court battle in which the insurance company, insurance agent, and insured argued over which party was at fault in issuing the policy and in completing the application.

It is important that any time you sign an insurance application that you read it carefully. Even if an agent completes the application, by signing you are attesting to the truthfulness of its contents. This is vital to any insurance policy because insurance companies can avoid paying a claim if they later determine that the application was incorrect. Particularly in large loss claims, insurance companies will comb over every piece of your application.

However, because you sign an incorrect application does not mean you have no legal remedy. First, an insurance company may not be able to void a policy if it issued the policy prior to you signing an application. Secondly, an insurance agent may also have a duty to assist you in acquiring insurance and in filing a claim. If the agent is found to have breached his/her fiduciary duty to you in failing to obtain insurance or in presenting false information to the insurer during the investigation of the claim, he/she can be held liable.

Still, you want to avoid lengthy court battles by reading any insurance application before signing and hiring an insurance agent that you trust.

This blog does not create an attorney-client relationship. You should not rely upon this blog for legal advice, but instead should consult an attorney experienced in your area of concern.