My agent completed an application that was not accurate or complete, and the insurance company denied my claim based on misrepresentation. I never saw the application.
Inaccurate applications can cause a coverage denial later. For example, if you said that the building was 70% occupied and it was actually 70% vacant, you will have a problem.
Accuracy and completeness of information are essential.
If an agent completes an application, it is binding on you in Michigan even if you did not sign it or see it. This is because the agent is legally your agent.
ACORD applications are the standard application universally used by insurance companies. It is virtually impossible to completely answer these applications without making misrepresentations.
These are just a few of the questions on the standard application:
o Any exposure to flammables, explosives, chemicals? (Everyone has flammables and chemicals of some sort.)
o Any catastrophe exposure? (Wouldn’t a building fire be a catastrophe?)
o Any policy or coverage declined, cancelled or non-renewed during the prior three years? (Typically, only your agent knows if an insurance carrier declined your account.)
o Any uncorrected fire code violations? (Does this mean that you have not complied with the building codes or that you have been cited?
o Any past, present or discontinued operations involving storing, treating, discharging, applying, disposing or transporting of hazardous material? (Even light industrial operations and offices have waste. How is “hazardous” defined?)
o Any employees under 16 or over 60 years of age? (Almost every business would have to say yes to this one.)
o Any seasonal employees? (Is the college student in the summer seasonal?)
o Any employees with physical handicaps? (We all have some physical handicaps, whatever that means.)
o Any employees traveling out of state? (Most employers have employees that may travel infrequently out of the state.)
o Any athletic team sponsored? (Many employers send a check to help out a church or other team. Does this constitute sponsorship?)
o Any hold harmless agreements? (Every insured has these in almost every agreement they execute.)
o Any vehicles used by family members? (Does this mean once a year when I loan my car to my wife?)
o List underlying insurance coverage information (include all restrictions). (You would have to copy every insurance policy.)
o List laser endorsements. (Does an insured know what this is?)
o Any subrogation waivers or extensions of coverage? (Again, you will have to copy and attach every policy you have in place.)
o Give details of all liability claims exceeding $10,000 or occurrences that may give rise to claims during the past 5 years, whether insured or not. (Would you even know what occurrences may give rise to a claim?)
The incomplete or inaccurate answers to these and other application questions could be the cause for a claim denial or policy rescission.
Answer ambiguously if necessary when it is impossible to answer a question yes or no. For example, the answer should be “always possible” to the question “any employees with physical handicaps?” (What is a “physical handicap” anyway?)