What is a material misrepresentation in life insurance claims
A life insurance company will say that a material misrepresentation in life insurance claims is when there is an inaccurate answer given on a life insurance application and had the answer been given correctly the policy would not have been offered or it would have been offered at a higher premium.
Some Courts have said that for a misrepresentation to be material it must have been done intentionally and would have caused the insurer to alter a contract.
In our opinion, a material misrepresentation in life insurance claims is when the insurer didn’t get the information from any outside source during underwriting, the applicant must have known the answer given was incorrect, and there is no evidence of exceptions in the underwriting processes of the insurer.
These are all similar but different opinions about what is a material misrepresentation in life insurance claims. Interestingly, each state’s definition of materiality is slightly different with some favoring insurers and some favoring insureds.
An insurer’s idea of material misrepresentation, of course, is the broadest and most favorable to it for denying claims. Ours is much more precise because we routinely learn that insurers will make exceptions in order to issue policies and collect premiums. Also, because there are questions of how a question is worded, what an applicant knows, and whether the insurer learned of the misrepresentation through third-party sources but didn’t divulge their knowledge, our opinion is vastly different than an insurers.
Material Misrepresentation
If a life insurance claim is going to be denied it almost has to be denied for a material misrepresentation. The misrepresentation occurs when the owner completes the application. The most common form of material misrepresentation is a medical misrepresentation but there are others.
What are some examples of material misrepresentations in life insurance?
One common example of a material misrepresentation in life insurance is when an applicant is a tobacco user (smoker) but doesn’t mark the box for tobacco use on the application. The cost of a policy for a tobacco user would be higher than if that same applicant was a non-tobacco user. Its underwriting manual will tell the underwriter to charge a higher premium to a tobacco user. If the applicant doesn’t mark the box for tobacco use, and he/she is issued a non-tobacco policy, the insurer has issued a policy based on a material misrepresentation.
Another example of material misrepresentation in life insurance is an undisclosed medical condition. An example is if an applicant was diagnosed with cancer within 2 years of his/her application but doesn’t disclose the cancer and the insurer’s practice is to require 5 years cancer free for a policy. In this example the underwriting guide will instruct to decline any offer of coverage. By issuing this applicant a policy the insurer is accepting a risk that it would otherwise decline.
What are other examples of material misrepresentations?
Other types of material misrepresentations are usually associated with driving history (speeding tickets and dui’s), incarceration, and some risky activities may be subject to materiality like scuba diving or piloting a plane.
There is an argument made by insurers that a person’s income or net worth can be the subject of a material misrepresentation but we wholly disagree and win this argument easily when it arises.
What’s the difference between a misrepresentation and a material misrepresentation?
For an application answer which is not correct to be material the answer must cause the insurer to accept a greater mortality risk than wanted or priced for.
Are some misrepresentations not material?
An inaccurate answer to questions of a person’s date of birth or personal contact information would not be considered material to the issuance of a life insurance policy. In other words, misstating a telephone number would not cause an unknown risk to a life insurer.
Is there any way to fight a life insurance denial for a material misrepresentation?
Yes. A life insurer cannot simply say they were misled and that the inaccurate information is material. They need to have written underwriting guidelines that back up such claims.
Likewise, if the insurer did know, through sources other than an application, of a material misrepresentation and they issued the policy anyway they effectively said ‘we don’t care’. In those cases a misrepresentation is not material.
And, if the applicant is not aware of their history – such as what a doctor writes in their medical record – then they cannot be held responsible for disclosing it.
We fight denied life insurance claims. When we accept a client we investigate not only the records of the applicant but also the acts of the insurance company’s underwriter. We leave nothing to chance in our determined effort to get our client’s claims paid.
For anyone who has had a life insurance claim denied we encourage you to contact us for help. We’ll do our own assessment and if we accept a claim our client never pays us a dime until we win their money from the insurer.
Call Us for a Free Death Claim Consultation
888-428-4868
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Material Misrepresentation according to US Legal
Material misrepresentation is the act of intentional hiding or fabrication of a material fact which, if known to the other party, could have terminated, or significantly altered the basis of, a contract, deal, or transaction. It is a misrepresentation that would be likely to induce a reasonable person to manifest his assent, or that the maker knows would be likely to induce the recipient to do so.
https://definitions.uslegal.com/m/material-misrepresentation/
Examples of how various states define Material Misrepresentation:
Material Misrepresentation in California
Misrepresentation of Material Fact Law in California
A material fact is a fact that is important, significant or essential to a reasonable person in deciding whether to engage or not to engage in a particular transaction. Material misrepresentation of material fact, is the intentional omission of a material fact in order to motivate a certain transaction to take place. In these cases, the material fact would generally be considered negative against the value represented by the transaction.
Material Misrepresentation in Florida
Fraudulent Misrepresentation under Florida Law
In Florida, “there are four elements of fraudulent misrepresentation: ‘(1) a false statement concerning a material fact; (2) the representor’s knowledge that the representation is false; (3) an intention that the representation induce another to act on it; and (4) consequent injury by the party acting in reliance on the representation.
Material Misrepresentation in New York
A misrepresentation is “material” if “knowledge by the insurer of the facts misrepresented would have led to a refusal by the insurer to make such contract.”
Material Misrepresentation in Massachusetts
Intentional Misrepresentation or Fraud
PLF must show, more likely than not, that six
things are true:
- DFT made a false statement to PLF.1
[This would include a
misleading half-truth.].
- The false statement concerned a fact that was important to PLF’s
decision.2
- When DFT made the statement, s/he/it knew that it was false or
recklessly disregarded the statement’s falsity.
- DFT intended PLF to rely on the false statement in making
his/her/its decision.
- PLF reasonably relied on DFT’s statement.
- By relying on DFT’s false statement, PLF suffered some financial
loss.3
Material Misrepresentation in Texas
Of note for Texas based claims is the May 2023, Texas Supreme Court decision which states that for a misrepresentation to be material it must have been intentionally omitted. That, now, puts a significant burden of proof on the life insurer to demonstrate that an incorrect application answer was more than lack of knowledge or a typographical error.
The Texas Supreme Court ruled that an insurer cannot deny a life insurance policy benefit unless it can prove a misrepresentation in the contract was done with the intent to deceive.
The ruling reinforces a long-held common law precedent that insurers have been trying to end in order to be able to reject a claim.
Circumstances before the American National Insurance v. Arce majority opinion, written by Justice John Phillip Devine, allowed a policy rejection by establishing two elements in the Texas Insurance Code: that the misrepresentation was of a material fact and that it affected the risks assumed.