Not all lies are malicious, but most of them can have troubling consequences for the liar.
When it comes to insurance policy applications, homeowners can feel overwhelmed by the “legalese” and questions, so they fill in the blanks to the best of their knowledge, hoping to plead ignorant should anyone question them.
The problem is that when it comes to insurance, even an accidental lie can cost you millions.
The Independent Insurance Agents and Brokers of America just recently told these stories:
In the first example, after experiencing some health problems an elderly widow was recuperating in a convalescent home, with all intentions to return to her house as soon as her health improved.
In the meantime, her children took care of the house and the woman never changed her legal address. Unfortunately, while the woman was not living at home it was destroyed in a fire. Since she wasn’t actually residing in the property at the time, the insurance company denied her claim.
As another example, a home was damaged by a hurricane. The homeowners had temporarily vacated the premises during remodeling though they visited the premises daily. The insurer denied the claim because the insureds were not residing there at the time of loss.
In yet another example, the purchaser of a home renovated it before moving in. During the renovations, the house suffered a six-figure fire loss. The insurance company denied the claim because the insured had never resided in the house prior to the loss.
And a Maryland Court ruled against the insured here: On the insurance application, the owner stated that the property was her primary residence and that no business was conducted on the property. During the policy period, the property was damaged by a fire. She submitted a claim.
While investigating the claim, it was discovered that the property was not her primary residence, despite her assertion on the application that it was. Additionally, for years leading up to and at the time of the loss, she leased the property to her business and used it as an assisted living facility.
The district court ruled for the insurance company, holding that the policy unambiguously stated that the insured location was the woman’s residence premises used for part- or full-time personal occupancy. The court concluded that since she had not resided at the property as stated under the policy, the property was not insured by the policy and, therefore, her insurance company was not liable for the loss.
Did these applicants intend to lie to their insurance company? Probably not. Did that exonerate them? No. Claim denied. The “truth” in insurance applications is not something to be taken lightly.
