The other day, a colleague and I were discussing potential insurance issues that could come up when another major catastrophe hits Florida. The conversation led to the subject of insurance application errors, which reminded me of Corey Harris’ post from June 8 of this year. Corey’s post accurately describes the rule of law in Florida under Florida Statute § 627.409, that any misrepresentation on an insurance application in Florida, whether innocent or intentional, may void coverage.
What happens if the insurance policy requires an intentional misrepresentation? That is exactly what happened in the case of Strickland Imports, Inc. v. Underwriters at Lloyds, London, 668 So.2d 251 (Fla. 1st DCA 1996). In Strickland, the insurer denied the insured’s fire claim on several theories including misrepresentation. The insured innocently misrepresented the use of one of its buildings on the insurance application when he failed to disclose that the building was used for manufacturing. Although Fla. Stat. § 627.409 applied, the insurance contract only voided coverage if the insured “willfully concealed or misrepresented a material fact.” Florida’s First District Court of Appeal followed the logic of the United States 11th Circuit Court of Appeals in a case interpreting a similar Alabama statute, and held that the contract language controlled.
Why is this important information for condominium associations? While insurance policies vary from place to place and insurance carrier to insurance carrier, and while a Florida First District Court of Appeal decision will not be binding in all of Florida, it is important because many condominium association policies use standard Insurance Services Office (ISO) forms, specifically the standard Commercial Property Conditions found in ISO Form CP 00 90 07 88. This form states in relevant part:
A. CONCEALMENT, MISREPRESENTATION OR FRAUD
This Coverage Part is void in any case of fraud by you as it relates to this Coverage Part at any time. It is also void if you or any other insured, at any time, intentionally conceal or misrepresent a material fact concerning:
1. This Coverage Part;
2. The Covered Property;
3. Your interest in the Covered Property; or
4. A claim under this Coverage Part.
While the Strickland case provides one defense to a claim denial based on an innocent misrepresentation where the policy requires intent, the best practice is to always be completely open and honest with the insurer and its agents. It is also a good idea to regularly review your policy and application, correct any errors that are found, and to have competent legal representation for your insurance needs.