Key Takeaway
New York court clarifies the high burden insurers face when claiming material misrepresentation as a defense to deny coverage in no-fault insurance cases.
Understanding Material Misrepresentation in Insurance Defense
Insurance companies frequently attempt to deny coverage by claiming that policyholders made material misrepresentations during the application process. However, New York courts have established strict standards that insurers must meet to successfully use this defense. The burden of proof is particularly high, requiring insurers to demonstrate not just that a misrepresentation occurred, but that it was material enough to have changed their underwriting decision.
This defense strategy has evolved significantly over time. What was once commonly referred to as fraudulent procurement has transformed into the more nuanced material misrepresentation defense, reflecting changes in how courts interpret insurance law. Understanding this evolution is crucial for both practitioners and policyholders navigating insurance disputes.
Jason Tenenbaum’s Analysis:
Alignment Chiropractic, P.C. v Travelers Home & Mar. Ins. Co., 2020 NY Slip Op 50994(U)(App. Term 2d Dept. 2020)
“A misrepresentation is material if the insurer would not have issued the policy had it known the facts misrepresented. To establish materiality as a matter of law, the insurer must present documentation concerning its underwriting practices, such as underwriting manuals, bulletins, or rules pertaining to similar risks, that show that it would not have issued the same policy if the correct information had been disclosed in the application” (Interboro Ins. Co. v Fatmir, 89 AD3d 993, 994 )”
“Upon a review of the record, we find that defendant failed to establish as a matter of law that it would not have issued the policy in question. Consequently, defendant did not demonstrate, prima facie, that the misrepresentation by plaintiff’s assignor was material”
It is so interesting how the fraudulent procurement defense transformed itself into the material misrepresentation defense”
Key Takeaway
Insurers cannot simply claim material misrepresentation without substantial proof. They must provide concrete documentation of their underwriting practices showing they would have denied coverage if accurate information had been provided. The transformation from fraudulent procurement to material misrepresentation defense represents a significant shift in how these cases are evaluated by New York courts.
