by KPMLAW | Jun 14, 2016 | KPMBlog, News, Uncategorized, Updates
Written by Gary Reinhardt, Esq. In Virginia, a material misrepresentation in an insurance application may render the insurance policy voidable. Who is an “applicant” is a question that an insurer must answer, particularly with small businesses set up as LLCs or corporations. In Jeb Stuart Auction Services, LLC v. West American Ins. Co., 122 F.Supp.3d 479 (W.D. Va. 2015), the Court ruled on who was the “applicant” when an individual completed an insurance application for an LLC. The person completing the application previously had been convicted of insurance fraud. The insurance application asked, “Has any applicant been indicted for or convicted of any degree of the crime of fraud . . .” The individual completing the application on behalf of the LLC answered “No” to this question. The individual then signed the application at the “Applicant Signature” location. Following a fire, the insurer voided the policy and denied coverage, claiming that the individual’s “No” answer to the fraud question amounted to a material misrepresentation in the application. The insured countered that the individual was not the “applicant.” Instead, the LLC was the “applicant” and the LLC had not been convicted of fraud, the LLC had not materially misrepresented facts on the application and, therefore, the LLC had coverage for the fire. The insurer responded that an LLC obviously cannot complete an application and must speak through its members. Further, in order to assess risk, the application must seek information about the party or parties that make up an LLC. The insurer argued that the failure to disclose the fraud conviction voided the policy. The Court sided with the LLC,...
