“Misrepresentation” in the context of insurance refers to the act of providing false, inaccurate, or incomplete information to an insurance company during the application process or when filing a claim. Misrepresentation can occur intentionally, where the applicant deliberately provides false information to gain a benefit such as lower premiums or policy approval, or unintentionally, due to misunderstanding the questions or inadvertently omitting information. Any false or incomplete answer is a misrepresentation; it’s material when the true answer would have changed the insurer’s decision.
Key aspects of misrepresentation include:
Impact on insurance contracts
Misrepresentation can lead to significant consequences for the policyholder, including the denial of claims, cancellation of the policy, or legal action by the insurer. Insurance contracts are based on the principle of utmost good faith, requiring both parties to deal honestly and disclose all relevant information accurately.
Types of information
Misrepresentation can involve any information that affects the insurer’s decision to underwrite a policy or the terms of that policy. This includes personal information, health status, or financial information.
Correction and disclosure
If misrepresentation is discovered after a policy has been issued but before any claims are made, insurers may allow the policyholder to correct the information and adjust the policy terms accordingly, including premium adjustments.
Legal definitions and implications
In Canada, the provincial insurance acts allow the insurer to void a contract for a failure to disclose, or a misrepresentation of, a fact material to the insurance; Quebec’s Civil Code similarly covers facts likely to materially influence the insurer. Once a policy has been in force for two years, the insurer generally can’t void it for a misrepresentation unless there was fraud. For disability insurance, this protection doesn’t apply to a claim for a disability that began in the first two years.