- c. Concealment, misrepresentation, or fraud: if the insured commits a fraudulent act regarding the policy, the commercial property coverage part is void.
- (1) Misrepresentation: the misstatement of a fact; policies are also void if the insured intentionally misrepresents facts regarding three items.
- (a) Insured’s interest in the covered property.
- (b) Covered property.
- (c) Coverage part.
- (2) Concealment: the failure to report a fact; policies are void if the insured intentionally conceals facts regarding the contract.
EXAMPLE Even though Arsonia has been convicted of arson five times, Arsonia applies for fire insurance. When Arsonia is asked whether she has been convicted of arson and she writes on the application that she has never been convicted of arson, Arsonia is committing an act of intentional misrepresentation and the policy will be void. Arsonia was rejected for fire insurance by one insurer, so Arsonia decides to go to Cheapie Insurance and try her luck there. Cheapie’s insurance application does not ask Arsonia whether she has been convicted of arson, so Arsonia does not tell Cheapie of her past. Arsonia is committing an act of intentional concealment and the policy also will be void.
- d. Liberalization: if an insurer broadens coverage for a commercial policy and there is no additional premium, the new coverage automatically extends to outstanding policies if the amendment is adopted either during the policy term or 45 days before the policy’s effective date.
- (1) Beneficial to insureds because insureds automatically receive broader coverage.
- (2) Beneficial to insurers because insurers do not have to search records to find clients who would be affected by coverage amendments and paperwork is cut down.