469_C354

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DISPUTABLE THAT INSURER PROPERLY VOIDED POLICY

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Homeowners	Ambiguity
Misrepresentation	Warranty

In 1998, Michael Dodd and his girlfriend, Katherine, were living together in Katherine's house in Frankfort, Indiana. The house was destroyed by fire on March 24, 1998. Katherine's insurer reimbursed her for the loss but did not renew the policy.

The couple decided to build a new house on the same property. In September 1998, Michael submitted an application for homeowners insurance to American Family Mutual Insurance Company. On the application, he stated that his "girlfriend/fiancée," Katherine, would be living with him in the new house. He also stated that he had not "had any past/current losses at any locations." American Family issued a policy to Michael on December 15, 1998. Michael renewed this policy regularly, in his name alone.

In 2000, Michael and Katherine were married. On December 19, 2003, their garage and its contents were destroyed by a fire. After receiving the claim for their loss, American Family learned of the 1998 fire that destroyed Katherine's house. The insurer denied the claim and informed the Dodds that the homeowners policy would not be renewed. The Dodds then sued American Family for breach of contract and intentional infliction of emotional distress.

The trial court found that American Family owed no insurance coverage and/or compensatory damages to the Dodds because of Michael's misrepresentations on the application. The insurer then tendered a check for all premiums collected from the Dodds, and the court clerk kept the funds pending the outcome of the Dodds' appeal.

On appeal, the Dodds admitted that Michael had made material misrepresentations on his application. They argued, however, that the effect of the misrepresentations was to make the policy voidable at the insurer's option, not to void it from the outset. According to the Dodds, American Family did not properly void the policy because it did not return their premiums. Therefore the policy remained in effect.

In response, American Family noted two clauses in its policy. The first clause provided: "You warrant the statements in your application to be true and this policy is conditioned upon the truth of your statements. We may void this policy if the statements you have given us are false and we have relied on them." The second clause read: "With respect to all insureds, this entire policy is void if, before or after a loss, any insured has: a. intentionally concealed or misrepresented any material fact or circumstance; b. engaged in fraudulent conduct; or c. made false statements; relating to this insurance." According to American Family, the second clause rendered the policy void from the outset.

The Court of Appeals disagreed. According to the court, the second clause was subordinate to the first clause because it was more specific in terms of the applicant's misrepresentations on an application. Accordingly, the policy was voidable by the insurer, not void from the outset. The court then addressed the question of whether the insurer took the proper steps to exercise its option to void the policy once the misrepresentations were discovered. It found that there were still factual disputes to be resolved. Accordingly, the court reversed the order of the trial court and remanded the case for further proceedings.

Dodd vs. American Family Mutual Insurance Company-No. 12A02-1010-CT-1414-Court of Appeals of Indiana-November 3, 2011-2011 WL 5239736 (Inc. App.)