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MISREPRESENTATIONS Misrepresentations- a statement, oral or written, express or implied, made by the insured to the insurer which forms at least part of the basis on which the insurer decides to enter into the K of insurance (a defense) Majority R le- any fraud/misrep. As to any portion of property under an insurance policy voids the entire policy Minority R le- if the representation of the insured is untrue/misleadin , and is material to the risk, and is relied upon by the insurer in issuin the policy at the specified premium, the insurer can use misrep. as a rounds of avoidance of the policy at any time, or as a defense to payment of proceeds under the policy o !" adopts the minority rule R!LE# $o vitiate and insurance policy usin fraudulent misrepresentation, insurer has to show# (%) false statement& (') the falsity was (nown to the applicant& ()) material to the ris(& (*) made w/ intent to defraud& and (+) relied upon by insurer in issuin policy Gasque v. Voyager Life Ins. Co. of South Carolina FACTS# ,, -od es, brou ht suit for breach of contract when . did not pay her disability benefits due to her and won. . appealed and stated she made false representations on her application when she stated she never had been treated w/ diseases of the heart or lun s and the policy was void. , had been treated for bronchitis previously but record was not clear she understood her dia nosis or that she had a disease listed by application. Ct. Reasonin"# /alse representations alone will not void, and should be considered ,0s ood faith in ma(in a 1false2 statement. 3hether she intended to defraud the . was a 4uestion of fact left to the 5ury and was properly iven to the 5ury.

#ol$in"# 6n favor to the ,.

Lanham v. Blue Cross and Blue Shield of South Carolina, Inc. FACTS% /or years , has had blood wor( done on liver and every time has been told was fine from %789-88. , received health insurance on */'7/7* and he had no di estive problems& indicated on his application. 3as turned down for :ife 6nsurance in %%/7%0 b/c of blood wor(, 6n %'/7%0 was dia nosed w/ hepatitis ". and . canceled policy in 7'0. , sued for breach of K and bad faith& . moved for summary 5ud ment. Ct. Reasonin"# $he burden of proof rests upon the insurer to prove that there was misrepresentation by , to deny covera e. "t. stated that there to be summary 5ud ment there must no enuine issue of fact which is not found here. Many times , had been told his liver was fine and indicated so on application. #ol$in"# Affirmed summary 5ud ment is denied. Carroll v. Jackson at!l Life Ins. Co. &'ar ( estion) FACTS% , had two life insurance policies and died durin the first ' years of those policies. . denied covera e b/c , made misrepresentations on the applications. R!LE# !" statute re4uires a provision that all life insurance policies have an incontestability clause after two years. 6f you receive life insurance policy, the insurance company can contest that policy w/in the first two years of the policy after then they cannot do so& unless it is due to non-payment of premiums. Ct. Reasonin"# $o deny a life insurance policy due to a misrep. on an application they company would have to prove all five misrepresentation elements and then the policy is void. $here does not have to be a causal lin( between the misrep and the death of the insured. !o if an insured of an life insurance policy dies w/in the first two years of the policy, the insurer does not need to prove a causal lin( of the misrep and the death of the insured in the application of the insured. #ol$in"# "overa e denial affirmed.

Notes Materiality- a representation is material to the ris( when the insured (nows or has reason to (now that it will li(ely affect the decision of the insurer as to whether to insure the applicant or as to the terms to the K O*li"ation to Corre+t Representations# $he insured is under obli ation to correct any representation that becomes untrue at any time before the K is formed but after K is under no obli ation Ret rn o, Pre-i -s- no eneral rule return of premiums after voidance of policy based on misrep. Representations *y A"ents- representations by a ents of the insured will be bindin upon the insured but not bound by representations made by )rd parties II. .ARRENTIES A. .arranties- refer to representations by the insured, incorporated into the K and sale, on the truthfulness or fulfillment of which it is a reed that the promise of the insurer shall depend. o 3hile the insurer has burden of provin misrep is material to void K, materiality of warranty is conclusively presumed o 3arranty/condition must be strictly complied with in order to preclude avoidance A,,ir-ati/e .arranty- is a statement concernin a fact as of the time the K is entered into and nothin more Pro-issory .arranty &Contin in")- is a statement or promise about the future of continuin truth of the matter represented "eid v. #ard$ard %ut. Ins. Co. &affirming $arranty'

FACTS% ;ephillia and 3.". <eid had fire insurance policy on house for +K. =olicy describes the insured buildin as# % story, approved roof, buildin owner occupied etc. 6n 9+0 <eid conveyed property to $ollison, but the policy did not transfer w/ property& and <eid still paid on it. -ouse burned down same year and <eid applied for full covera e and was denied. >ltimate 4uestion of whether the desi nation of 1owner occupied2 was a continuin warranty and therefore precluded <eid from covera e. R!LE% Affirmative warranty is a statement concernin a fact as of the time the K is entered into and nothin more. Ct. Reasonin"% $his was an affirmative warranty. ?o re4uirement on part of insurer that buildin be occupied by owner throu hout policy, merely descriptive. #ol$in"% 6n favor of <eid. (sala)atas v. *hoeni+ Ins. Co. of #artford, Conn. &)romissory $arranty' FACTS% , ot 1-ull and "ollision2 insurance on boat for % year. $he 1:ay->p 3arranty2 in policy stated that the boat must be laid up and out of commission durin the time specified. , wet stored boat, basically in a tin buildin on floats. , too( boat out )@@ yards from stora e buildin did some maintenance and went to put bac( when hit somethin in the water and sun(. 6ssue of whether the boat was considered laid up at the time the dama e occurred. R!LE# Pro-issory .arranty &Contin in")- is a statement or promise about the future of continuin truth of the matter represented Ct. Reasonin"# :oo(ed to other cts. to answer the 4uestion and came to the opinion that , did not comply w/ promissory warranty when he removed boat. "ustom in the area to repair boats durin winter months does not cover& the warranty was to excluded out ris(s that come under this scenario. #ol$in"# /avor to the ..

'. Co rt Interpretation Johnson v. South State Ins. Co. FACTS# , sou ht to recover fire insurance benefits after house burned down. . denied entire claim due to fraud by , in the contents claimed. R!LE# /raud will only void provisions tainted by the fraud. Minority view which !" holds. A Ma5ority- any fraud/ misrep. voids entire policy Ct. Reasonin"% $he fraud in this case only dealt w/ contents therefore recovery was properly voided, but recovery allowed for dwellin and livin expenses. ,lias v. -ireman!s Ins. Co. FACTS# , sou ht homeowner covera e after house burned down. 6n 8+0 , was sold auto insurance that came under one K of his home and auto insurance. -is home insurance was bein paid from an escrow account set up and his auto premiums were 78B per 4uarter. /irst, bill he received was wron included his home and auto, he called and complained. $hey said the only way to fix was to cancel policy and start over. 6n short , payments were sporadic due to incorrect billin and insurer notified , of cancelation of policy. -ouse burned down, , could not pay mort a e and foreclosed. , brou ht suit for covera e. R!LE# A contract of insurance may be divisible where the property consists of different items which are separately valued or insured for spate amounts. Ct. Reasonin"# "t. has lon reco niCed that an insurance K may be divisible. $he homeowner0s insurance premium was paid the auto not. , was in breach of the auto not homeowner0s insurance& the notice of cancelation was only effective for the auto and not the homeowner0s. #ol$in"# /avor for the ,.

C. C rtailin" t0e E,,e+ts o, .arranties South Carolina Ins. Guaranty .ss!n v. Broach FACTS% . denied aircraft covera e to , when aircraft was lost at sea due to policy exclusion. =olciy contained that student pilots must be under direct supervision of licensed pilot instructor and receive permission before all fli hts. !tudent did not receive permission before fli ht and lost plane. R!LE% An insurance exclusion does not limit covera e unless it is causally related to the loss. ($his is the modern trend. $he Ma5ority <ule- an insurance exclusion is effective whether or not there is any causal connection between the excluded ris( and loss. Ct. Reasonin"# $he rationale of the rule is that when parties made the K of insurance, they were not insertin a mere arbitrary provision but that it was the purpose of the insurance company to relieve itself of liability from accidents caused by the eluded provision. $he cert. 4uestion answered is that an insurer must show a causal connection between a loss and an exclusion before the exclusion will limit covera e under the policy.