Florida 2-20 General Lines Agent (Property, Casualty, Commercial Lines and Florida Law)General InsuranceHard
A General Lines Agent discovers that a client intentionally misrepresented a material fact on their application for a property insurance policy, leading the insurer to issue a policy it otherwise would not have. This action by the client could be grounds for the insurer to:
- AOffer a different policy type.
- BRequire a higher deductible.
- CIncrease the premium retroactively.
- DRescind the policy.
Show answer & explanationAnswer & explanation
Correct answer: D. Rescind the policy.
Misrepresentation of a material fact by an applicant, if discovered, grants the insurer the right to rescind the policy. Rescission means the contract is treated as if it never existed, and the policy is voided from its inception, typically with a return of premiums paid.
Why the other options are wrong
- A. Offering a different policy type might be an option if the misrepresentation was innocent, but not for intentional material misrepresentation.
- B. Requiring a higher deductible is a prospective underwriting action, not a remedy for a past material misrepresentation.
- C. Retroactive premium increases are generally not a remedy for material misrepresentation; rescission is the stronger action.
Rescission (Insurance)
The legal remedy that voids an insurance contract from its inception, treating it as if it never existed, typically due to material misrepresentation, concealment, or fraud by the applicant.
- Voids the policy from the start
- Usually involves return of premiums
- Requires proof of material misrepresentation or fraud
Memory trick: Misrepresentation means the contract is RESCINDED, like a bad decision erased.