Small Fraud - Just Like a Large fraud - Voids Insurance

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Material Misrepresentation Concerning the Extent of Loss Voids Policy


Read the full article at https://www.linkedin.com/pulse/can-never-fraud-too-small-void-policy-barry-zalma-esq-cfe/?published=t and at https://zalma.com/blog plus more than 3650 posts. 


After the defendant insurance company was granted summary judgment, ending the action, the plaintiff appealed that summary-judgment ruling. In Meat Town Inc. v. Sentinel Insurance Company, Case No. 19-2351, USCA 6TH (3/30/21) was asked to find the fraud wasn’t big enough to stop the insured from collecting the remainder of its loss.


ZALMA OPINION


If the only consequence of a fraudulent misrepresentation is to reduce the amount paid under the policy, there is every incentive for insureds to lie. If the lie is undetected the insured will have obtained excessive coverage for which he has not paid. If the lie is detected the insured will still obtain what he could have had if he had told the truth. In essence, the insured has everything to gain and nothing to lose by lying. The victims will be the honest insureds who tell the truth ... for the excessive insurance proceeds paid out as a result of undetected misrepresentations...  [New York Life Ins. Co. v. Johnson, 923 F.2d 279 (3d Cir. 01/15/1991)].

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