On Tuesday, in Dodd v. American Family Mutual Insurance Company, the Indiana Supreme Court affirmed that misrepresentations on an application can void an insurance policy.
We first reported on this case back in November 2011. (See our previous post here.) Here’s a brief summary:
Michael Dodd applied for a homeowner’s policy for a house he would be building and said that his girlfriend would also live in the house with him. Mr. Dodd had been living in his girlfriend’s house, which had just burned down, but Mr. Dodd didn’t include any of that info in his policy application. A few years later, Dodd’s new house catches on fire. The insurer finds out about the other fire and denies coverage, arguing the policy was void.
The trial court granted summary judgment in favor of the insurer on the grounds that Mr. Dodd’s misrepresentations voided the policy. The Indiana Court of Appeals agreed that the insured made material misrepresentations, but disagreed that the policy was void at the outset. Instead, it was voidable at the insurer’s option, which requires a timely return of premiums paid. (The insurer had interpleaded the premiums with the trial court.)
The Indiana Supreme Court affirmed the trial court’s summary judgment ruling and held that the insurer wasn’t required to tender a return of the premiums in order to rescind the policy because the amount of premiums to be returned–a little over $2,000–was less than what the insurer had already paid out for a hail damage claim before the fire. That meant that the insurer not only won the case, it also got its money back.