On November 24, 2010, a divided panel of the Indiana Court of Appeals held that when an insurance policy asks if a particular event has "ever" happened to you, then it means ever. In
, 938 N.E.2d 227 (Ind. Ct. App. 2010), Case No. 85A04-0905-CV-240, the Court held that a policyholder's failure to have this same understanding meant that the insurer could deny coverage (because the misrepresentation was material).
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The Goods were homeowners who were insured by Allied. Allied's application for insurance asked for the name of the applicant's current insurance company, the number of years with that company, and the expiration date of that policy. On the same line, there is a space to answer the query, "Coverage ever declined, cancelled, or non-renewed." The Goods answered this question with respect to only the policy in effect when they filed the application, not their entire insurance history. The house subsequently caught fire and Allied denied coverage, claiming that the Goods' failure to tell it that a prior policy had been cancelled was a material misrepresentation. This was not the only point of disagreement and the parties filed cross-claims against each other. Allied moved for summary judgment, which the trial court denied. A trial ended in a mistrial, which was affirmed on an appeal by Allied. After a second trial, a verdict was entered for the Goods. Allied appealed.
On appeal, Allied raised numerous issues, but the Court found the denial of summary judgment to Allied dispositive. In a footnote, the Court found that it could address this issue, even though Allied did not raise it in the first appeal, noting that parties may challenge interlocutory orders on appeal from the final judgment. It then addressed the meat of the issue and held that, even though the question about whether coverage had "ever" been cancelled was on the same line as questions about the current insurance coverage, "ever" still meant ever.
The Goods claim "ever" refers only to the policy in effect when they filed the application – that is, the application was asking if the MetLife homeowners' policy Linda had when she applied for the Allied policy had ever been declined, cancelled, or not renewed. The cancellation question could not have been limited, as the Goods argue, to the "current company." It is not possible that the current insurer had "refuse[d] to undertake, undergo, engage in" insuring the applicant for the current policy. Under the Goods' interpretation, there could be no "current company." Similarly, if the "current company" had "destroy[ed] the force, effectiveness, or validity of" the Goods' coverage, it could not be their "current company," because the Goods would no longer have a contract of insurance with that company. As there could be no current company if coverage had been canceled or denied, we decline their invitation to so interpret the application's language.
Allied presented an affidavit from one of its underwriters that stated: "If Linda and Randall Good had disclosed the fact that they had coverage canceled by prior insurers (in this case multiple cancellations), Allied would not have issued the subject policy or would have charged a higher premium." The Goods did not designate any evidence to the contrary. Based on this (and the fact that other jurisdictions had found this type of misrepresentation "material"), the Court concluded that summary judgment should have been granted to Allied.
The dissent disagreed with both the Court's interpretation of the insurance application and the materiality of the misrepresentation. The Court appears to have tried to lessen the impact of its decision in footnote 4, in which it states as follows:
As explained below, Linda's misrepresentation was undoubtedly "material." Our opinion therefore should not, and cannot, be read to encourage, or even permit, parties to comb through insurance applications in hopes of finding any false statement in an effort to reduce premiums or avoid paying benefits. Only a "material" false representation could permit either result.
It is unclear what effect this footnote will have on future cases. The Court's decision on the issue of "materiality" appears to be based on the fact that the insurer presented an affidavit asserting that the misrepresentation was material and that the homeowners could not present any evidence to the contrary. These types of facts may exist, even in situations in which an insurer "combs through insurance applications in hopes of finding a false statement." Litigants are surely to disagree over how to apply this aspect of this decision.
Of note to proceduralists (like myself) is the fact that the Court addressed the failure to grant summary judgment in this appeal, even though the case had previously been appealed to the Court after the denial of that motion. In my appellate experience (in Ohio), the Court likely would have held that such an argument was waived because it was not raised in the first appeal. Therefore, Indiana applies the rule allowing interlocutory appeals after a final judgment more generously than I expected.
