The obligation of good faith and fair dealing rests equally upon all parties to a policy. The applicant for insurance must exercise toward the company the same degree of good faith which the company is required to exercise toward her.

Litigation involving underwriting activities generally arises out of policy rescission. This “unmaking of an agreement” attempts to return the parties to status quo. However, misrepresentations, omissions, concealment of facts and incorrect statements generally do not prevent recovery under the policy unless there is evidence of:

  • Fraud;
  • Material misrepresentation either to the acceptance of the risk, or to the hazard assumed by the insurer; or

  • The insurer, in good faith, either would have not issued the policy, or; Would not have issued it at the same premium rate, or; Would not have issued a policy with the same limits of liability, or; Would not have provided coverage to the hazard resulting in a loss, …if true facts had been made known to the insurer as required either by the application for the policy or otherwise.

Misrepresentations made by a policyholder generally are:

 ▪ Loss of claim history

 ▪ Insurance history

 ▪ Interest in the property

 ▪ Concealment of duplicate coverage

An insurance company waives any right to void insurance coverage for alleged misrepresentations or omissions in the application, if, after it learns it may have grounds for such relief, it does not promptly seek the relief, but instead takes any action inconsistent with an intent to treat the policy as void.