A prospective homeowners insurance customer in New York revealed to an agent that, less than two years ago on his original application for a homeowners policy, he stated that he had no dogs on the then "prohibited dog list" but actually did have two pit bulls. This was done before New York restricted carriers' ability to limit or deny homeowners coverage based on ownership of specific dog breeds. Since then, the policy has been renewed for the first time.

The agent told the prospect that the policy could be void due to his fraudulent statement on the original application. Had the carrier known the facts at application, it may not have written the policy in the first place and no renewal policy would have been forthcoming.

Q: In the event of a claim—dog-related or otherwise—would the carrier be able to declare the policy void back to inception due to fraud or material misrepresentation by the applicant?

Response 1: I cannot opine whether or not a New York court would rescind or void for a slip and fall or fire claim because of the false information about the dogs unrelated to the specific loss. Like you, I would not want my clients to take that risk. 

Rather than take the risk of it becoming a potential coverage issue, the prospect should work with his current agent to prepare a new application or update information for the renewal. That might include a review of values for structures, personal property, additional living expenses, valuable articles floaters and liability exposures. He could update the homeowners, personal auto policy and personal umbrella policy, if applicable, with the current agent and send the data to the underwriters to update the renewal underwriting. That gives the carrier the opportunity to underwrite what could hopefully be a fresh start.

For this prospect, you should submit correct information to your insurers. If the prospect doesn't buy your proposed coverage, move on to other prospects and clients. If you are considering taking over via an agent of record transfer, then consider your duties to the insurer and your own errors & omissions exposure, as well as your desire to properly serve the policyholder.

I have seen several agent E&O cases where they took over on an agent or broker of record transfer and did not update data. When a loss occurs and the policyholder sues them, they point to the former agent but can't escape that they did not work within the standard of care to obtain current data themselves. By your question, I infer that you won't be in that situation.

Response 2: Now that you know about it, as an agent of the insurer, you are contractually obligated to report it to the insurer. It's up to them to decide what to do with it and your opinion counts for nothing. 

Response 3: What an interesting and tricky question. I see convincing arguments for both parties. I think that if a claim arose that directly involved the pit bulls, I'd side with the insurer that the misrepresentation could be a basis for recission.

Does the insured still have the dogs? What did the original policy or application have to say in that context? Was a questionnaire sent with the renewal? Mt. Hawley Insurance Company v. AKI Renovations Group Inc. is one New York case to at least give you a start on looking at legal precedent. 

Response 4: You are correct that, had the carrier known about the breed, it could have voided the policy. In claims, it usually comes down to a "material fact." If the insured suffered a windstorm damage, then the carrier may not have voided the policy because the windstorm and dog breed are not material to one another. A dog bite claim would be another story. 

Since the issue appears to be moot, as you say New York has forbidden breed exclusions now, why worry? But do use this as a cautionary tale to your insured on the necessity to be honest with one's insurer.

Response 5: Intentional misrepresentation of any type is very, very serious. The carrier can walk and the agent can be left with the problem customer. Your concern about the subsequent New York dog breed ruling is legitimate as the misrepresentation occurred prior to the statute change. 

Separately, if the insured intentionally misrepresented one element, what else is misrepresented? I would caution against taking on this prospect. 

This question was originally submitted by an agent through the Big “I" Virtual University's (VU) Ask an Expert service, with responses curated from multiple VU faculty members. Answers to other coverage questions are available on the VU website. If you need help accessing the website, request login information.

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