A Misstatement on Your Application for Insurance Can Cost You!
May 15, 2020: Recently the Supreme Court of Ohio decided Nationwide v. Pusser. Ms. Pusser was living with her sister at the time she (the sister) purchased an auto policy with Nationwide. One of the questions asked on the application for insurance was whether there were any other persons in the insured person’s household. The sister answered that she was the only person in her household even though Ms. Pusser was living with her at the time of the application.
Ms. Pusser struck and killed a pedestrian while driving her sister’s car. Nationwide refused to provide coverage for the accident, claiming that the policy was void “ab initio” or “from the beginning”—as if there had never been a policy. The trial court held for Nationwide that the policy was void. The appellate court reversed, meaning it held that Nationwide would have to provide insurance coverage, and Nationwide’s appeal was taken up by the Ohio Supreme Court.
In a unanimous decision, the Supreme Court of Ohio held for Nationwide that the policy was void from the beginning. Put simply, it was as if there had never been insurance on the sister’s vehicle. The reason—the Court found that Ms. Pusser’s sister had notice that a misstatement (failing to list a licensed driver living in her household) on her warranty (the application for insurance) which was specifically incorporated into and part of the policy was sufficient to allow the insurance company to void the policy from the beginning as if it never existed. You can read the entire opinion here: http://www.supremecourt.ohio.gov/rod/docs/pdf/0/2020/2020-Ohio-2778.pdf
Several takeaways here: The Court did not say in its opinion that either fraud or an intent to deceive the insurance company was necessary to void the policy; only a “misstatement.” The Court found that Nationwide’s policy language sufficiently warned applicants that misstatements in the application were a breach of warranty which could lead to a void policy. And the policy was not cancelled from the date the misstatement was discovered but rather was voided as if it never existed, which meant there was no insurance coverage on the date of the fatal accident. Finally, there was no discussion whether, in addition to the civil penalties for which Mr. Pusser or her sister might be found liable, either or both women would or could be subject to driver license suspensions for failing to carry liability insurance.
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