Filling Out Policy Application

Springtown insurance lawyers know about the importance of an insurance policy being correctly filled out.  This was illustrated in a 2016 opinion out of the Southern District, Houston Division, styled, Perfit Vision, et al v. Mount Vernon Fire Insurance Company.

John Luong owed a portion of Eyewear Express and in 2013, Eyewear bought a store and renamed it Perfit Vision.  Mount Vernon issued Loung a one-year casualty policy beginning coverage on Feb. 21, 2014.

Luong reported to Mount Vernon that the store had been burglarized on March 8-9.  Mount Vernon denied the claim.

The Mount Vernon policy was predicated on Luong’s (a) warranty that the information he supplied in the application was true and (b) payment of a 25% premium as a down payment.  When he applied for the policy, the insurer required him to disclose earlier insurance policies, including information about claims and cancellations of coverage.

Luong has previously had coverage with Allstate that he twice made claims for and Allstate had cancelled the policy in 2103, because Luong had not paid the premium.  In the application with Mount Vernon Luong had warranted that he had not claimed under a policy in the preceding three years, when in reality he had filed two claims, both similar to this claim.  These are clear misrepresentations that void the policy.

On the Mount Vernon, it was learned that Luong had not paid the premium.  Non-payment cancels the policy.

Luong sued Mount Vernon for breach of the policy and violations of the Texas Prompt Pay Act, Texas Unfair Settlement Practices Act, and Deceptive Trade Practices Act.

The Mount Vernon policy also required Luong to “maintain” a burglar alarm at the store “in complete working order.”  An alarm is not in working order when it is off.  Luong claims the burglary was between March 8th and March 10th.  The alarm company’s records say:

Alarm turned on at 5:11 p.m., Saturday, March 8th

Alarm turned off at 9:10 p.m., Sunday, March 9th

The alarm was still off when employees discovered the burglary at 9:50 a.m., Monday, March 10th.  Luong did not maintain the alarm for 12 hours overnight when the store was closed – unattended by workers, the time was needed.

Luong did not pay the down payment required by the policy.  Insurance contracts – like other contracts – are promises of indemnity in exchange for cash consideration.  Mount Vernon promised to pay Luong for some potential losses to him of business property.  In exchange, he promised to pay it a cash premium.  He did not pay.  His nonpayment is a failure of consideration of the policy.  He cannot sue Mount Vernon for failing to cover his losses.

Luong’s application for insurance said he had not made a claim, he had not had a policy cancelled in the last three years, and he signed a warranty certifying that he agreed that if those statements were not true the insurer could void the policy.

Luong concedes that his statements were knowingly false.  Mount Vernon promised to insure Luong if he was honest on his application.  He was not.  Luong cannot lie about these underwriting risks yet still enforce the promise he tricked Mount Vernon into making.

The Judge ruled that Loung take nothing on his claim.