Misrepresentations on Insurance Applications
Old Line Life Ins. Co. of Amer. v. Garcia is another case that suggests a "misrepresentation" on an insurance application should be glaring if the insurance company is going to rescind based on it. In Garcia, a life insurance applicant wrote and told a medical examiner that she was buying the policy to replace her three existing ones. The policy was issued, and the insured passed away from lung cancer a short time later. The insurance company argued that the court should rescind the contract because the applicant misrepresented that she was going to replace the existing policies, and the insurance company would not have issued the policy had it known she was not going to terminate the existing policies. The District Court granted summary judgment for the insurance company. The Sixth Circuit Court of Appeals vacated the decision and remanded.
The key part of the case is that a statement on an insurance application that the applicant will replace existing insurance policies for a new one is a future promise, so it cannot be a misrepresentation of past or present fact. Tennessee law also says that a promise to do something in the future cannot be the basis for a misrepresentation. This case should be applicable to Tennessee insurance policies as well, then. On the other hand, a strong enough statement that the insurance applicant will do something specific, including replace an existing policy, could be a condition precedent to coverage. Something to watch out for in insurance coverage disputes.
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