Even if an insurance policy’s terms expressly cover a loss, a claim can be contested. The reason often lies in the insurance application itself. In addition to challenges over the interpretation of policy terms, some policyholders have fought with their insurance company over whether the information disclosed at the point of sale was sufficient or accurate.

These claim challenges can be detrimental to policyholders, as the insurance company may try to void the entire coverage, rendering the insurance claim purportedly uncovered and the policy void from inception. Accordingly, policyholders must proceed cautiously when procuring their insurance policies to minimize the risk of insurance company evading paying an otherwise covered insurance claim.

The Duty of Utmost Good Faith

Historically, many fights over insurance applications and an insurance company’s attempts to rescind coverage unfolded over claims for directors and officers (D&O) coverage. Fights over alleged misstatements on the D&O insurance application and corresponding battles over rescission were so frequent that pushback around it prompted insurance companies to regularly include provisions making coverage non-rescindable.

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