What if Both the Insurer and the Insured Cause a Misrepresentation in an Insurance Application?

This is fun - what happens if insurance coverage is based on misrepresentations in an application, but the misrepresentations were due to both mistakes by the insurer and oversights by the insured? The general rule, with variations among jurisdictions as to certain specifics, is that coverage is void if obtained based on misrepresentations in an application for an insurance policy. The general rule though, can only be understood intellectually as being based on the assumption that the insured is accountable for the misrepresentations or other errors in the application. The Massachusetts Appeals Court has just found that the misrepresentations do not void coverage after a claim is made under the policy where it was an agent of the insurer who made the mistake, and the insured's only role was, in essence, justifiably relying on the agent. In Guerrier v. Commerce Insurance Company, No. 05-P-606. (May 25, 2006), the insured simply signed the application in blank, relying on the insurance agent, whom the court found was an agent of the insurer, thus making her actions those of the insurer, to fill out the actual application. The court placed the risk of errors in the application under that circumstance on the insurer, not on the insured. Obviously, the court could have imposed a rule that placed the burden on an insured to make certain that documents submitted in the insured's name are correct, and it may well turn out that a different set of facts presented to the court in the future might support and result in such a ruling. For instance, it appears that in the case before the court, the facts added up to justifiable reliance by the insured on the agent, thus arguably justifying the insured's acts of omission. The rule in a future case, might, however, be different if the facts allowed for the persuasive argument that the insured's reliance on the agent was not justifiable.

Beyond that, the key factual finding here in my view was that the insurance agent was an actual agent of the insurer; it seems to me the ruling would have to be different if the facts showed that the agent was acting on behalf of and as the actual agent of the insured in soliciting quotes from insurers and seeking policies from various carriers.

The case can be found at http://www.masslawyersweekly.com/signup/opinion.cfm?page=ma/opin/coa/1111106.htm.