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Material Misrepresentation: How Risky Is It to Lie on Your Insurance Application?

by | Oct 8, 2020 | Legal

We all hate filling out forms – myself included! One of the most common legal outcomes of this impatience towards forms is called ‘material misrepresentation’.

Allegations of material misrepresentation can come up when a client is completing their application for insurance, and either intentionally or not, that client leaves out key details in their responses.

But are there any big risks associated with material misrepresentation on insurance applications?

The reality is that insurance companies remain under a lot of scrutiny when it comes to processing and adjusting their claims. On the other hand, Canadian courts have made it clear that insurance applicants should be put under the same type scrutiny when they purchase a policy of insurance. This means that dishonesty or omission of information with your insurance company, whether intentional or not, can hurt you when you need that policy to kick in.

Two key considerations in material misrepresentation cases include:

  1. You made a false or untrue statement on your insurance application.
  2. Your false statement was material to determining the cost of the policy.

We can break this first part down into a simple example. Let’s say you’re applying for life insurance and you are asked if you’ve ever seen a doctor for issues related to your heart. Even if you saw a doctor for a heart concern but were not diagnosed with any specific heart problem, the answer should be yes. If you say no in this case, you have made a misrepresentation.

In many cases, an insurance broker might be the one to fill out these forms on your behalf. If you answered “yes” to your broker but he/she made the judgement to respond with “no” on your behalf, you may still have a problem. This is because you subsequently signed the form on which the broker committed material misrepresentation.

Once we’ve determined whether there was an incorrect answer on the application, we can then begin to investigate whether that answer made a difference in how your claim was processed. If you received a lower insurance policy rate because of your untrue statement that you never saw a cardiologist, then your misrepresentation may very well have been material.

But what if the misrepresentation had nothing to do with the actual claim?

Many people believe that if their misrepresentation has nothing to do with the reason of the claim, then it likely won’t matter. An example of this can be if somebody withholds the fact that they have a history of breast cancer and then proceeds to file a claim in relation to a heart attack. While breast cancer is unrelated to the heart attack claim, it may still be considered a material misrepresentation, and your policy may be voided.

So, is it worth the risk?

Very often when people make false claims like this, they fail to realize that insurance companies have a lot at stake and will invest considerable resources to investigate claims. This includes requesting full and detailed medical records so that they can confirm the legitimacy of every answer on the claim. In many cases, individuals who have made false claims will get caught.

If you’re currently dealing with a material misrepresentation case, contact us for a free consultation!

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