An applicant for an insurance policy, whether life insurance, automobile liability, homeowners or other, must answer the questions in the application with full disclosure or risk the policy being declared void by the insurance company. In general, if the omitted information could have altered the insurance provider’s risk assessment, the policy may be voided by the insurance company.
For example, an omission on a life insurance application allowed the insurance company to void the policy in the 2007 decision in Spinelli v. Monumental Life Ins. Co. In that case, the plaintiff, a widow and beneficiary of a life insurance policy, sued to recover life insurance benefits on the life of her husband (“Spinelli”) that were denied to her by the defendant, Monumental Life Insurance Company (“Monumental”). Monumental filed a counterclaim to rescind the policy due to Spinelli’s omission of health information from his insurance application.
Monumental issued a universal life insurance policy to Spinelli in 1985. However, due to non-payment, the policy lapsed in February 2001 and Spinelli lost all coverage. During the lapse period, Spinelli was diagnosed and treated for lung cancer and heart disease. In April 2001, Spinelli applied for reinstatement of the life insurance policy. Monumental required Spinelli to fill out a reinstatement application. As part of the reinstatement application, Spinelli was required to submit satisfactory proof of eligibility, including representing that he was free from all disease, deformities, or ailments
In February 2003, Spinelli died. Because Spinelli's death occurred less than two years from the effective date of the reinstatement, which was within the contestable period, Monumental performed a routine claim investigation. Monumental obtained Spinelli's medical records, which verified that he had a significant medical history which he failed to disclose on the reinstatement application.
The records disclosed that Spinelli failed to disclose the lung cancer diagnosis, heart conditions and his related treatment when answering the relevant inquiries on his reinstatement application. Plaintiff argued that Spinelli merely signed his name to the reinstatement application before submitting it, and that Monumental’s insurance agent was responsible for writing “None” on the reinstatement application in response to the question asking whether he had any ailments or had been attended by a physician.
The court found that Spinelli committed a misrepresentation on his reinstatement application by omitting a fact while answering an inquiry on the application. Because Monumental could demonstrate the misrepresentation by omission materially affected the risk Monumental assumed when coverage was originally granted, Monumental was allowed to rescind the policy.
A purchaser of any type of insurance should be cautious to answer every question on the application as honestly as possible to avoid rescission of the policy. If you have a question about an insurance policy or if an insurance policy which you have purchased is being challenged by the insurance company, please contact a member of the firm.