It’s Not Nice to Lie to Your Insurer

Read the full article at https://www.linkedin.com/pulse/cancellation-rule-requires-contradictory-evidence-zalma-esq-cfe and at https://zalma.com/blog plus more than 3900  posts. 

An insurance company sought a judgment that an automobile insurance policy issued to a mechanic does not provide coverage for an accident involving the mechanic. After examining the mechanic under oath, the insurance company moved for summary judgment, arguing that the policy contained a business purpose exclusion for accidents occurring while road testing a vehicle, which the mechanic stated he was doing at the time the accident occurred. In Tennessee Farmers Mutual Insurance Co. v. John A. Simmons et al., No. E2020-00791-COA-R3-CV, Court of Appeals of Tennessee, Knoxville (September 14, 2021) the insurer asked that the Court of Appeal reverse based on the cancellation rule.

ZALMA OPINION

The covenant of good faith and fair dealing requires that neither party do anything to deprive the other of the benefits of the contract. Simmons attempted to deprive Farmers of its right to exclude coverage while he was test driving the vehicle involved in the accident by changing his sworn testimony at trial from the sworn testimony at EUO. Since the two statements were contradictory they fell afoul of the cancellation rule and should have been ignored by the trial court and the jury. They were not and the judgment was reversed in favor of the insurer. What the court did not consider was that one of his sworn statements was false, sufficient grounds to deny the claim and void the policy.