Misrepresentation

One party may agree to an insurance contract because it was mislead by the other party. The misrepresentation could have prevented either party from agreeing to an insurance contract.

Misrepresentation is different from a mistake. Misrepresentation may be conscious or unconscious.

Three Types

There are three types

  1. material misrepresentation
    • if the truth were known, a reasonable insurer would have
      • refused to issue a policy, or
      • charged more
  2. fraudulent misrepresentation (fraud)
    • intentionally made by one party with the goal of misleading the other party
    • affected the decision of the insurer to issue to issue the policy or to issue the policy at that price
    • e.g., a smoker claiming to be a nonsmoker
    • terminates the insurance contract at any time (no time limit)
  3. innocent misrepresentation
    • no intent to deceive the other party

The insurer cannot terminate an insurance contract for misstatement of age — even if intentional.

Your Advisor's Role

Your advisor must not misrepresent the benefits of a product. If you suffer a loss as a result, your advisor could be liable.

In litigation, your advisor's conduct must hold up to detailed inspection

  • e.g., could be liable for misstatements made at a seminar if the audience members
    • relied on those statements, and
    • suffered negative consequences

Tip: Misunderstandings can easily occur — even with family and friends. Talking to your advisor early and regularly can often resolve them.

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