In his article Insurers: To Rescind Or Not to Rescind?, insurance agency expert witness Akos Swierkiewicz writes:
The square footage figures provided by the insured and its broker in the application was lower than the figure in the inspection report that was ordered by the insurer after it issued the policy. In asserting materiality, the insurer disregarded another inspection report subsequently ordered by the insured, which confirmed the original figures in the application for the policy.
Based on the above points, it was not reasonable for the insurer to rely on the square footage information provided by the insured, and the insurer’s contention that it did rely on the square footage data provided by the insured was questionable.
Although this case was resolved and the insured received payment for its claim, the pre-trial discovery process took over a year, with detrimental financial consequences to the insured.
The lesson from cases like this is that all parties should take thorough measures to ensure the accuracy and completeness of underwriting information, and that conflicts or ambiguities are promptly resolved before coverage is bound.