Coverage for Fire Loss Denied Based on Inaccurate Application for Insurance

    The Ninth Circuit affirmed the District Court's granting summary judgment to two insurers who denied coverage based upon inaccurate insurance applications. Hughes v. First National Insurance Company of America, 2024 U.S. App. LEXIS 6609 (9th Cir. March 20, 2024).

    Plaintiff submitted a claim to First National Insurance Company of America and General Insurance Company of America when her property burned down. After learning that the property was used as a short-term rental and had suffered three prior lossses in the past five years, both insurers denied the claim. They then sought judicial recission of the policites based on material misrepresentations in plaintiff's insurance applications. 

    Both insurers had applications asking whether the property was used for business or commercial purposes, and whether the applicant had suffered a loss on the property in the last five years. If an applicant answered either question in the affirmative, the application was denied.

    Here, plaintiff completed applications with both insurers stating in each that the proeprty was a "single-fmaily dwelling," that it was not used for business, and that she had suffered no losses on the property in the last five years. Based on these responses, both First National and General Insurance issued policies to plaintiff.

    The district court granted summary judgment to the insurers. On appeal, plaintiff argued that her property was used only as a single-family dwelling and that, regardless, the policies permitted occasional rental use. The policies, however, did not authorize rental use and plaintiff had used the property as a short-term rental. Plaintiff had stated in her declaration that she had never run a business at the property, but a declaration contradicting her prior testimony could not create an issue of fact. 

    Plaintiff also claimed she did not understand the applications because of a language barrier. Further, the agents who finalized her insurance applications did not seek her approval before sending them to First National and General Insurance. Under California law, however, a material misrepresentation or concealment in an insurance application, whether intentional or unintentional, allowed the insurer to rescind the policy. Therefore, plaintiff's subjective understanding or intentions were immaterial to whether she misrepresented the use of her property.