Thou shalt not be rewarded for misrepresentations!

Written by Collett P Small. Esquire on . Posted in General

That was generally the tone of the Third District Court of Appeal in the case of GRG Transport, Inc. v. Certain Underwriters at Lloyd's London , et al. , 896 So.2d 922 (3rd DCA, March 2, 2005). The Third District Court of Appeal held that the policy was voided by an insured's misstatement in the application for insurance that no insurer in the past five years refused to renew or cancelled insurance.

In December 1998, GRG, a cargo-transportation company, with the assistance of their insurance agent, South Pacific Professional Insurance, Inc., applied to Lloyd's of London (Lloyd's) for cargo insurance with a policy limit of $250,000 per truck. As with most applications for insurance, GRG were required to fill out an insurance application form. Question 16 of the insurance application inquired about the applicants' "loss experience whether insured or not on All Risks/Broad Form basis from first dollar/with no deductible for the past five years." GRG responded "none." Question 19 of the application asked whether any insurer had refused to renew or cancel the applicant's insurance in the past five years. Again, GRG responded in the negative. In question 22, GRG declared that the statements and particulars given on its application for insurance "are true to the best of my/our knowledge and belief. ." Based on GRG's representations on the application for insurance, Lloyd's issued a cargo policy.

Sometime later, GRG's truck was hijacked and over $500,000 in cargo was stolen. GRG's claim to Lloyd's was denied and GRG filed suit for breach of contract. During discovery it came to light that before completing the application for insurance with Lloyd's, GRG's commercial automobile liability policy was refused renewal by its carrier due to the theft of empty trucks. It was also discovered that after GRG was refused renewal it secured insurance through Progressive. The policy with Progressive was later cancelled for lack of payment. However, none of this information was made known to Lloyd's in answer to question 19 on the application for insurance.

Armed with this information, Lloyd's filed a motion for summary judgment arguing that GRG misrepresented material facts when it answered question 19 of the application for insurance and therefore the policy was void ab initio . GRG in its written response to Lloyd's motion for summary judgment argued that GRG believed question 19 referred only to cargo loss policies and not all insurance policies. GRG further agued that Lloyd's waived its right assert a defense of material misrepresentation in regards to question 19 because it did not notify GRG of this defense by registered or certified mail as required by the Claims Administration Statute, section 627.426(2), Florida Statutes (2003). On December 3, 2003, the trial court heard Lloyd's motion for summary judgment and entered final judgment in favor of Lloyd's. GRG appealed.

The trial court's order was subject to de novo review because the issue of ambiguity of the insurance application is a question of law. The court held that question 19 of the application was not ambiguous as it clearly requested GRG to disclose whether any insurance company had refused to renew or had cancelled a policy issued to GRG within the past five years. Concerning the issue of Lloyd's failing to comply with the Claims Administration Statute, section 627.426 (2); the court agreed that Lloyd's did not strictly comply with the statute. However, the court held that GRG's material misrepresentation rendered the policy void from the date of the inception and adherence to the Claims Administration Statute was then irrelevant.