Sometimes your past comes back to haunt you. Awhile ago, this homeowner and his wife had a fire. (He left Halogen work lights on next to some combustibles when most of the family was out of town.) During that claim, however, they decided to create phony receipts and submit them for payment to the insurance company. Their insurance company found out and denied the rest of their coverage for fraud. Well, these insureds thought that was unfair because they had perfectly good reasons for making false receipts.
In fact, they claimed, the insurance company told them to do it – so they SUED trying to get the rest of their coverage. When the judge stopped chuckling, he threw their case out of court.
About a month after the suit was dismissed, they needed coverage on a new house – a very big and expensive house – so they applied for insurance with our client. The first question on the application asked whether they had any claims denied for fraud in the last 5 years. Even though they had been – just 15 months earlier – they decided to answer the question “no.”
Two years went by until “tragedy” struck again – their house burned down. (All totalled, they had 3 houses and three vehicles destroyed by fire – and their in-laws lost a house to fire too – since 1995.) That’s when our client found out about the earlier denial. Although this fire was extremely suspicious, the insureds’ involvement did not have to be determined. Once the application fraud came to light, the policy was completely rescinded. So it didn’t matter if they were arsonists, they didn’t even have a policy. Faced with that news, they sued.
The explanations were many. Primarily, however, they tried to say that they told the agent everything and he instructed them to answer no. The agent disagreed, the paperwork disagreed and we went to a bench trial. At trial, they not only attempted to explain that “no” was actually the correct answer, they continued to claim that the previous submission of phony receipts was not fraud! The judge listened to all the evidence; asked for additional briefs and recently issued a written opinion that they did make material misrepresentations on the application and the company had every right to rescind the policy.
While this may all seem straight forward, it turned into a big deal because of the size of the claim. These insureds hoped to get almost $740,000 due to this fire. When the smoke cleared, they got nothing – and no longer had that beautiful house. Bad choices often make bad endings.
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