A New York and New Jersey Lawyer Who Represents Policyholders and Beneficiaries in Life Insurance Denial Cases

A New York homeowner was denied coverage under a homeowner insurance policy issued by Vermont Mutual after it was discovered that he made material misrepresentations in the policy application. The case, Vermont Mutual Insurance Company v. Moslem, 07-cv-2011 (Scheindlin, J., July 14, 2011), was venued in the Southern District of the Federal District Court.

The policyholder had a policy of insurance on his Middletown, New York home and, when it was set to expire, applied for another policy with Vermont Mutual. Vermont Mutual, in the litigation that ensued after the home suffered a fire, claimed that each misrepresentation allegedly contained in the policy application independently warranted recission. Some insurance companies will claim that the totality of several misrepresentations meet the materiality standard, implicitly acknowledging that some specific misrepresentations do not individually.

According to the court’s opinion, the agent completed the application, based on information obtained from the homeowner, and they reviewed the application together. As an aside, in my experience, insurance agents do not frequently review insurance applications in a careful manner with their customers. Of note, the policyholder represented himself pro se in this case.

In her opinion, the judge quoted language contained in the policy that an applicant has read and reviewed the application, and affirms the information was complete and correct. She also observed that the policyholder had listed the property for sale prior to obtaining insurance, and subsequently moved out of the property and began leasing it without informing Vermont Mutual. The home was then destroyed by fire.

The alleged material misrepresentations were that: (1) the premises was a new purchase; (2) there was no prior insurance on the property; (3) the policyholder had no other residence; and (4) the premises were not for sale. The judge looked to the policy language which stated that “homes with more than 90 days cumulative rental are not eligible for coverage.” Although the policyholder did occupy the premises at the time the policy was issued, the judge found that he “had or was about to vacate the premises and began leasing it almost immediately after the application was submitted.” The judge thus elected not to take a narrow or technical view of the policy and the facts.

The court’s decision was made upon motion. Either the pro se policyholder did not raise critical facts in his favor or such facts simply did not exist. This decision is yet another reminder that it is important for insurance policyholders, especially in a state like New York or New Jersey that take a strict approach to material misrepresentations, to make sure that they carefully review the policy application and during the life of the policy inform the insurance company of material changes.

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