Various Coverages and the impact of Misrepresentation or Fraud

Since 1912, the Florida Supreme Court has allowed for the divisibility of an insurance contract when there has been a dispute as to a breach of conditions under one portion of coverage and conformity to provision under another. Harfod Fire Ins. Co. v. Hillis, 64 Fla. 8, 59 So. 785 (1912). However, that case also made a distinction between cases with fraud or misrepresentation and those without. Id. At 786. So what happens if an insured makes a material misrepresentation or commits fraud when asserting a claim for different coverages under a policy?

In the context of homeowner’s insurance it appears that the language of the policy controls the impact of misrepresentations or fraud on the entirety of the loss. When a policy provision or condition provides clear language that the entire policy is “void” upon a finding of fraud or material misrepresentation, the courts have upheld the provision to apply to multiple coverages within the policy. See Schneer v. Allstate Indemnity Co., 767 So.2d 485 (Fla. 3d DCA 2000), and Wong Ken v. State Farm Fire & Casualty Co., 685 So.2d 1002 (Fla. 3d DCA 1997)

In Schneer, Hurricane Andrew caused damage to both the dwelling and personal property owned by the Schneers. A jury found that the Schneers had made material misrepresentations as to the valuation of the personal property. The appellate court found that the policy’s provision outlining fraud and/or material misrepresentation as grounds for a full denial/voidance of the policy was properly interpreted as such by the trial court.

However, in looking at policies dealing with automobile coverage, specifically those related to Uninsured Motorist (UM) and Personal Injury Protection (PIP) coverages, the Supreme Court emphasized a dissimilarity to that of other insurances as both UM and PIP were statutorily created to ensure protection of an injured party. Thus, as was the case in Flores v. Allstate Ins. Co., 819 So.2d 740 (Fla. 2002), when a misrepresentation or fraud occurs under one of those coverages, it does not automatically bar coverage in the other as the Court needed to look beyond the policy to the purpose of the statutory protection.
The Court in Flores notes that the “conditions or exclusions must be carefully scrutinized first to determine whether the condition or exclusion unambiguously excludes or limits coverage, and then [if applicable] to determine… whether enforcement of a specific provision would be contrary to the purpose of the [statute at issue].”

Takeaway: The policy language controls when there is fraud in a homeowners claim. When there is fraud in a motor vehicle claim you need to look at the policy language and then to case law to determine the impact of public policy on coverages that are governed by statute (UM and PIP).