When is a misrepresentation material on an application for
insurance coverage? The Ninth Circuit affirmed a decision from the
Central District of California, finding that an answer on an
application for D&O insurance was a material misrepresentation,
and that therefore the policy was rescinded.
The question on the application asked:
None of the individuals to be insured under any Coverage Part
(the "Insured Persons") have a basis to believe that any
wrongful act, event, matter, fact, circumstance, situation, or
transaction, might reasonably be expected to result in or be the
basis of a future claim?
Professional Collection Consultants (PCC) – the applicant
– responded "no." However, six months before
submitting its application, the FBI had executed a search warrant
at PCC's offices. Subsequently, investigators subpoenaed
several PCC employees and PCC produced thousands of documents. This
information was not disclosed on the application.
