Homeowners Policy Did Not Provide Coverage Due to Misrepresentation
- June 23, 2020
America is a diverse country. Its people speak a variety of languages. Even English-speakers have many different accents. English sounds one way from a Texan, another from a Brooklynite, another from a Bostonian, and yet another from a native of Louisiana. Given all these languages and varieties, can an insurance agent be confident that he understood what a client said? Not always.
A Louisiana couple purchased a house in the spring of 2018 for $55,000. They then purchased a Homeowners insurance policy that took effect eight days later. Less than a month after the effective date, a fire caused substantial damage to the home. The insureds submitted a claim for $170,000 to the carrier the following day. A few weeks later, the house was demolished by order of the local authorities.
The carrier investigated the fire, including an examination under oath (EOU) of the insureds, that summer. The investigation revealed that the insurance application the insureds submitted did not present an accurate description of the property. According to the insurer, the house had termite and other damage and was missing sheetrock. The EOU revealed that the insureds had not moved in to the house at the time of the fire, that they were making extensive repairs, and that the only utility connected at the time was the electricity. While the authorities concluded that the fire was accidental, the insureds claimed that the prior owner had been arrested in connection with it.
The carrier filed suit, asking the court to declare:
● There was no coverage because the insureds never resided in the home
● The policy was void because the insureds made misrepresentations on the application
● If the house was vacant when the fire occurred, there was no coverage for vandalism and mischief
● A vacancy exclusion applied if the house was vacant for more than 60 days
● The insureds increased the hazard by leaving the house vacant
The insureds argued, among other things, that they faced a language barrier because they spoke French Creole, rather than English. They claimed that they “provided Bowles (the insurance agency) with honest information regarding their plans for the Property and Bowles completed all necessary forms using this information.” Any misrepresentations on the application were the agent’s responsibility, not theirs. They sued the agency, seeking indemnification in case the court ruled in the carrier’s favor, plus other damages. The agency asked the court to dismiss the lawsuit.
The judge noted in her opinion that a motion to dismiss must meet a high threshold of evidence and such motions are “rarely granted.” Accordingly, her decision cut the insureds a lot of slack. “(B)ecause dismissal is a harsh remedy,” she wrote, “short of granting a motion to dismiss, a court may grant a plaintiff leave to amend his complaint.” She did just that on every count of the insureds’ complaint, rejecting the motion to dismiss the suit and allowing the insureds to revise their claims for a later court hearing.
As of this writing, there have been no further published opinions, so the insureds are likely revising their claims against the agency while the carrier’s lawsuit is pending.
Further proceedings may reveal that the agent did not misunderstand his clients and that the application reflected what they told him. However, it is possible that the language barrier prevented him from completing the application accurately. In such a situation, an agent may need a translator to verify the accuracy of the information.
Agencies are wise to market to diverse populations, but that presents complications. Information can get lost in translation, and that can result in a lawsuit.