Florida Statute 627.409 (2010) allows an insurance company to rescind an insurance policy on the grounds of misrepresentation if it can prove:
a) The misrepresentation, omission, concealment, or statement is fraudulent or is material either to the acceptance of the risk or to the hazard assumed by the insurer.
(b) If the true facts had been known to the insurer pursuant to a policy requirement or other requirement, the insurer in good faith would not have issued the policy or contract, would not have issued it at the same premium rate, would not have issued a policy or contract in as large an amount, or would not have provided coverage with respect to the hazard resulting in the loss.
However, in Casamassina v. US Life Ins. Co., 958 So. 2d 1093 (4th DCA 2007), the insurance carrier was prevented from using the statute to rescind the policy by language in its own insurance application.
United States Life Insurance Company issued a $500,000 life insurance policy to John Casamassina on November 6, 1997. Less than two weeks later, Casamassina was diagnosed with a brain tumor; he died on December 4, 1997. After U.S. Life denied the policy claim, the trust beneficiary of the policy and the widow filed suit.
U.S. Life denied coverage based on what it considered to be factual differences between information contained in the insurance application and circumstances in the six week period immediately preceding its completion. Although Casamassina had sought medical advice from various doctors for severe headaches, dizziness, congestion, loss of balance, nausea or vomiting, and pressure in the head, he failed to acknowledge these symptoms in the application when questioned about medical conditions.
Casamassina signed the application with this declaration:
I hereby declare that, to the best of my knowledge and belief, the information given above is correctly recorded, complete, and true, and I agree that the Company [US Life], believing it to be true, shall rely and act upon it accordingly.
(Emphasis added).
Relying on the Florida Statute, the circuit court granted summary judgment for the insurer. In reversing, the 4th DCA decided that the “less stringent” “knowledge and belief” standard set forth in the insurance application controls over the strict standard set forth in section 627.409(1). In its view, “[A]pplication of this standard means that an omission or misrepresentation in an insurance application, when the application is completed to the best of the applicant’s knowledge and belief, is not a basis for rescission of a policy.”
The case was sent back to the circuit court with instructions that the question of whether or not the application was completed by Casamassina to the best of his knowledge and belief, must be answered by the jury.
Besides the legal point addressed by the court, the larger lesson to be learned is that in cases involving insurance contract disputes, every document associated with the policy, including the application, should be considered.
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