Also known as: materiality to the risk · material fact
Written by attorneys · grounded in primary & secondary sources — see below
A fact that would affect a reasonable insurer's decision whether to issue a policy or the terms on which to issue it. The fact must be one that influences the underwriting choice about the nature or extent of the risk assumed.
Maurice Marshall applied for life insurance and stated he had never consulted a physician for lung issues. The insurer later discovered Marshall had seen doctors forty-three times for lung ailments. The insurer moves for summary judgment arguing the false answer was material to the risk. The court grants the motion because no genuine dispute exists that a reasonable insurer would have viewed the medical history as affecting the decision to issue the policy.
Miguel Mendoza applied for property insurance through his lawyer, who stated there were no prior claims. The lawyer later learned the statement was false. The lawyer must correct the false statement because the prior claims history was material to the risk the insurer had assumed.
Select any source to read its text and confirm it supports the definition.
Madison Meyers told an insurer's underwriter that Miles Montgomery's granddaughter had never filed insurance claims when the report actually concerned someone else. The insurer issued a policy on that basis. The policy is voidable because the false statement concerned a fact material to the risk assumed.
Midwest Airlines obtained aviation insurance after representing that its aircraft parts met strict safety standards when defects were known. A loss occurred. The insurer may deny coverage because the false statement concerned a fact material to the risk assumed under the policy.
Mason McCarthy's client sought to conceal a prior insurance cancellation when applying for new coverage through a lender's program. McCarthy knows disclosure is required. He must disclose the cancellation because it is a fact material to the risk the insurer would assume.
Marco Marquez told a prospective insurer that a property had no history of insurance claims when he knew the statement was false. The insurer later suffered loss. Marquez is subject to discipline because the false statement concerned a fact material to the risk the insurer would assume.
A fact is material to the risk when a reasonable insurer would consider it important in deciding whether to issue the policy or on what terms. Courts examine whether the fact would have led the insurer to refuse coverage or charge a higher premium.
Many jurisdictions require the insurer to show it relied on the truth of the answer when issuing the policy. Reliance may be shown by evidence that the insurer would have acted differently had it known the true facts.
Materiality focuses on the effect the fact would have had on the insurer's underwriting decision rather than the applicant's state of mind. Intent to deceive is a separate element that some statutes require in addition to materiality.
…argues, Baldwin-Ehret-Hill was covered by Liberty's policy. We hold that there was before the district court a genuine issue of material fact on this point. Therefore, the district court erred in including the issue in its summary judgment order. CONCLUSION In view of the above, we reverse the district court's order of…