How Relevant Is a Misrepresentation

As most Llano insurance  lawyers can tell someone, the answer to the titled questions is:  It Depends!

A 1976, Waco Court of Appeals opinion gives some guidance on an answer.  The case is styled, Westchester Fire Insurance Company v. English.

Posing as husband and wife when in fact they were not married, Reaves Hickey and Carolyn Meadows purchased a frame house and two lots from Fannie English.  English conveyed the property to Hickey and wife Carolyn. by warranty deed with a vendor’s lien note.  These documents were executed in front of and notarized by Westchester agent, Kenneth Logan.  At closing Logan issued a standard homeowners policy on the house and contents.  The premiums were paid and accepted by Westchester.  A few months later and contents were destroyed in a fire.  Westchester failed to make cover the claim, a lawsuit was filed, and prior to trial Westchester learned for the first time that Hickey and Meadows were not married.

The policy provides in part that it “shall be void if, whether before or after a loss, the insured has willfully concealed or misrepresented any material fact or circumstance concerning this insurance, or the subject thereof, or the interest of the insured therein, or in case of any fraud or false swearing by the insured relating thereto.”

English initiated the lawsuit to recover on the vendor’s lien note.

The case was tried to a jury who found in favor of coverage and this appeal by Westchester followed.

Westchester contends that the evidence in the case established that Hickey’s representations to Logan that he and Meadows owed the house and contents as husband and wife and they they would occupy and use the house as such were material to the risk and were relied upon by Westchester and since this information was a misrepresentation, the policy is void and there is  no coverage.

This court ruled that a misrepresentation in an application for a policy is not material to the risk of insurance unless it actually induces the insurance company to assume the risk.

There is testimony that Hickey was separated from her husband; that Hickey is a divorcee; that they plan to marry when Meadows secures a divorce; that Hickey works at two jobs; that they intended to and did occupy and use the house, along with Meadow’s three year old daughter, in typical fashion; and that Hickey misrepresented their marital status to English and Logan so the papers wouldn’t have to be changed over, later, and because he thought it was the proper thing to do under the circumstances.  Ken Tomlinson, an underwriter employed by Westchester, testified to several reasons why Westchester would not have issued the policy to Hickey if it had known the true relationship between Hickey and Meadows.  Logan testified he couldn’t say exactly what Westchester would have done.  Westchester has not offered to return any premiums.

Tomlinson was an interested witness, and the jury was not obligated to believe him.  The evidence does not show as a matter of law that the misrepresentations were material to the risk or that Westchester was induced by them to issue the policy by the misrepresentations.  A review of the entire record convinced the Court of Appeals that the jury’s answers on the materiality of the misrepresentations were wrong.