In my last blog post, June 1st Is The First Day Of Hurricane Season, I discussed the importance of an association checking to make sure that policies are in effect and contain the proper coverages before disaster strikes. It is equally important to make sure that the information in the insurance application is correct. Otherwise, insurers may attempt to deny even the most obvious of covered losses.
Florida Statutes § 627.409 deals directly with this issue:
(1) Any statement or description made by or on behalf of an insured or annuitant in an application for an insurance policy or annuity contract, or in negotiations for a policy or contract, is a representation and is not a warranty. A misrepresentation, omission, concealment of fact, or incorrect statement may prevent recovery under the contract or policy only if any of the following apply:
(a) The misrepresentation, omission, concealment, or statement is fraudulent or is material either to the acceptance of the risk or to the hazard assumed by the insurer.
(b) If the true facts had been known to the insurer pursuant to a policy requirement or other requirement, the insurer in good faith would not have issued the policy or contract, would not have issued it at the same premium rate, would not have issued a policy or contract in as large an amount, or would not have provided coverage with respect to the hazard resulting in the loss.
It is important to note that the insurer does not have to prove that the misrepresentation was intentional or intended to deceive. Even an honest mistake may result in a claim denied. The insurer could argue that if the true information had been disclosed, it would have issued the policy at a higher premium or a lower policy limit.
While the burden is on the insurer to prove that it actually would have changed its determination of premiums, limits, etc., it is important to note that this statute is very broad. Even an unintentional or seemingly minor error in an application can be devastating to a claim. Thus, it is always important to have open and honest discussions with your agent both before and after the policy is in effect. If you find that there has been a mistake, let your agent know and find out what to do in order to correct it. While the premium may increase in the short term, an association is much better off with a higher payment than with no coverage after a large loss.