It Doesn’t Pay to Lie in an Application for Insurance

August 8, 2026

3 Views 0

SaveSavedRemoved 0

Post 5418

An Insurer May Rescind An Insurance Policy Where The Applicant Made A Material Misrepresentation In The Application.

In Union Mutual Fire Insurance Company v. 844 Knickerbocker, LLC, et al. No. 2024-10359, Index No. 602824/22, 2026 NY Slip Op 04789, Supreme Court of New York, Second Department (July 29, 2026) Union Mutual Fire Insurance Company issued commercial insurance policies to 844 Knickerbocker, LLC, and Sanjaya Mallick based on applications stating that the insured property contained two apartment units. After an underlying personal injury action was filed, Union Mutual determined that the property actually contained three apartment units and rescinded the policies on the ground that the defendants had made a material misrepresentation in the applications.

LAW:

A misrepresentation is material if the insurer would not have issued the same policy, or would have issued it only on different terms, had the true facts been disclosed. To establish materiality as a matter of law, the insurer must submit documentation of its underwriting practices, such as manuals, guidelines, bulletins, or rules addressing similar risks.

DISCUSSION/ANALYSIS:

The Appellate Division held that Union Mutual made a prima facie showing of entitlement to summary judgment by submitting an underwriter affidavit and underwriting guidelines demonstrating that the correct information regarding the number of apartment units would have affected the premium charged.

The defendants failed to raise a triable issue of fact in opposition. As a result, the Supreme Court erred in denying Union Mutual’s motion for summary judgment and in granting the defendants’ cross-motion dismissing the complaint.

CONCLUSION:

The order was reversed. Union Mutual was entitled to summary judgment declaring that the policies were void ab initio and that it had no duty to defend or indemnify the defendants in the underlying personal injury action. The matter was remitted for entry of an appropriate declaratory judgment.

An insurance company has a right to rescind an insurance policy if the applicant makes a material misrepresentation on the insurance application

To establish materiality as a matter of law, the insurer must present documentation concerning its underwriting practices, such as underwriting manuals, bulletins, or rules pertaining to similar risks, which show that it would not have issued the same policy if the correct information had been disclosed in the application.

Here, the plaintiff demonstrated its prima facie entitlement to judgment as a matter of law on the complaint. The plaintiff established that the defendants made a misrepresentation in the applications for the subject insurance policies that was material by submitting an affidavit of its underwriter, as well as certain guidelines showing that a higher premium would have been charged if the correct information had been disclosed. Accordingly, the trial court:Supreme Court should have granted the plaintiff’s motion for summary judgment on the complaint and denied the defendants’ cross-motion for summary judgment dismissing the complaint.

Since this is a declaratory judgment action, the appellate court remitted the matter to the Supreme Court, Nassau County, for the entry of a judgment, among other things, declaring that the subject insurance policies are void ab initio and that the plaintiff is not obligated to defend or indemnify the defendants in the underlying.

Insurance is a contract of good faith and fair dealing. An insurance application is a statement of facts presented to an insurance company as a request for insurance and must be presented fairly, completely and in good faith. When the insurer failed to tell the truth by telling the insurer it was insuring a two unit apartment when it was really three. That was a material misrepresentation and grounds for rescission.