Michigan Concludes Policy Void When Insured Lies On Application About a Material Fact

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In March 2014, plaintiff paid the amazing sum of $10,000 to purchase a home in Flint, Michigan. Three years later he applied for insurance and significantly, the application listed that the purchase price and current market value of the home was $75,000 a blatant misrepresentation. 

In Stephen Council v. Allstate, No. 351676, State Of Michigan Court Of Appeals (February 18, 2021) the appellate court found who was responsible for the misrepresentation and its impact on the claim.

ZALMA OPINION

Telling an insurer that a house is seven and a half times more value than the cost and true value raises a moral hazard that no intelligent insurer would accept since a fire – intentional or accidental – would allow an insured to profit from the loss. Insurance can never be a gamble. The insured, by lying on the application for insurance was his own enemy. The application was fraudulent and the rescission of the policy was the appropriate avenue available to the insurer.