Although the below case pertains to an insurance matter in California, it deals centrally with the issue of "materiality," which can rise to a level of importance in some disputes regardless of where they occur.
Whether an insured's policy contains material misrepresentation of facts germane to one or more questions being answered or conceals material facts in response to queries is universally relevant, and we therefore think that our readers across Colorado might be interested in how the California case was resolved.
That dispute pitted a landlord against his insurer, which refused to defend the policyholder in a claim brought by tenants because of its view that he both misrepresented and concealed material facts in certain answers he provided in his coverage application.
The trial court sided with the insurer, and the landlord appealed.
On appeal, the appellate panel looked closely at the issue of materiality and what threshold applies to it. The court noted that a fact which would lead an insurer to deny coverage would be deemed material if it was misrepresented or undisclosed. Additionally, materiality might be established by an applicant's failure to respond to specific questions.
The court noted that an insurer has no duty to show a connection between misrepresentation or concealment and the claim brought by an applicant, nor does it have to prove that a misrepresentation or concealment was purposeful. That is, a policyholder's mistake or negligence can still result in a ruling for an insurer.
After scrutinizing the trial record, the appeals court reversed the lower court, finding for the landlord. In doing so, the panel noted that a policy cannot be rescinded when its insured is forced to answer application questions that are ambiguous (capable of being interpreted more than one way). The court found that both of the questions that the insurer claimed were answered in materially fraudulent ways were unclearly stated.
Insurance policy disputes often revolve around competing interpretations and claims focused on matters such as threshold questions of materiality, clarity versus ambiguity in drafting and other language-related considerations.
A proven insurance law attorney can provide guidance and diligent legal representation in such matters.