In All Should Use Greater Care Handling Underwriting Information, insurance expert witness Akos Swierkiewicz writes:
State insurance laws generally allow the insurer to deny claims or rescind the policy for misrepresentation or omission, including concealment fact or incorrect statement, if:
* it was material either to the acceptance of the risk or to the hazard assumed by the insurer, or
* a reasonable insurer would have acted differently had it known the true facts, e.g. would have charged higher premium, restricted coverage or declined to issue the policy.
While most misrepresentations or omissions are unintentional, the insurer’s right to deny claim payment or to rescind the policy is not limited to intentional or fraudulent misrepresentation under a number state laws, when either of the above two criteria applies.