Duffy's Insurance Policy
Dr. R. LeWayne Johnson, PHD
Duffy’s Insurer’s Defenses
Case Issue The issue in this fact pattern is whether an insurance company was justified in relying on the misrepresentation made by the insurance applicant in their application for insurance that their forty-eight-room lodging house in Worcester, MASS was protected by sprinklers, despite an earlier report in the insurer's file indicating the absence of sprinklers.
Rule of Law: The Massachusetts General Laws Chapter 175, §186 (Mass. Gen. Laws ch. 175, §186) states in relevant part: No oral or written misrepresentation or warranty made in the negotiation of a policy of insurance by the insured or on his behalf shall be deemed material or defeat or avoid the policy or prevent its attaching unless such misrepresentation or warranty is made with actual intent to deceive, or unless the matter misrepresented or made a warranty increased the risk of loss. Clarkson, Miller, and Cross (2012) clarified the MASS statute by pointing out that “...an insurance applicant is bound by any false statements that appear in the application...” (p. 1002). the authors go further to note that “...Because the insurance company evaluates the risk based on the information included in the insurance application, misstatements or misrepresentation can void a policy, especially if the insurance company can show that it would not have extended insurance if it had known the facts...” (p. 1002). The fact pattern suggested that the Duffys in applying to General Star Indemnity Co. for insurance coverage indicated on the 1994 insurance application that the premises of which the insurance was to cover, had sprinkler systems. General Star issued an insurance policy in reliance on this application that the Duffys submitted to them. Additionally during an inspection of the premises by a General Star agent/representative (inspector), the inspector inserted a hyphen in the area on the insurance application
Duffy’s Insurer’s Defenses
Case Issue The issue in this fact pattern is whether an insurance company was justified in relying on the misrepresentation made by the insurance applicant in their application for insurance that their forty-eight-room lodging house in Worcester, MASS was protected by sprinklers, despite an earlier report in the insurer's file indicating the absence of sprinklers.
Rule of Law: The Massachusetts General Laws Chapter 175, §186 (Mass. Gen. Laws ch. 175, §186) states in relevant part: No oral or written misrepresentation or warranty made in the negotiation of a policy of insurance by the insured or on his behalf shall be deemed material or defeat or avoid the policy or prevent its attaching unless such misrepresentation or warranty is made with actual intent to deceive, or unless the matter misrepresented or made a warranty increased the risk of loss. Clarkson, Miller, and Cross (2012) clarified the MASS statute by pointing out that “...an insurance applicant is bound by any false statements that appear in the application...” (p. 1002). the authors go further to note that “...Because the insurance company evaluates the risk based on the information included in the insurance application, misstatements or misrepresentation can void a policy, especially if the insurance company can show that it would not have extended insurance if it had known the facts...” (p. 1002). The fact pattern suggested that the Duffys in applying to General Star Indemnity Co. for insurance coverage indicated on the 1994 insurance application that the premises of which the insurance was to cover, had sprinkler systems. General Star issued an insurance policy in reliance on this application that the Duffys submitted to them. Additionally during an inspection of the premises by a General Star agent/representative (inspector), the inspector inserted a hyphen in the area on the insurance application