False Statement on Application Requires Rescission

Post 4719

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Betty Baldwin appealed from a summary judgment in favor of Kentucky National Insurance Agency (KNIC) and Holton, Melugin, and Haverstock Insurance Agency, Inc., d/b/a Haverstock Insurance Agency, Inc. (Haverstock) because of false statements on an application for insurance.

In Betty Baldwin v. Kentucky National Insurance Company; and Holton, Melugin And Haverstock Insurance Agency, Inc., D/B/A Haverstock Insurance Agency, Inc., No. 2022-CA-0840-MR, Court of Appeals of Kentucky (January 19, 2024) the Court of Appeals applied state law to resolve the issues.

FACTS

According to Baldwin two of the answers provided on the application were incorrect at the time of signing. Baldwin indicated in Question 28 that she did not specifically have a German Sheperd. Further, Baldwin in Question 32 indicated that she had never had a prior fire loss.
Sometime after signing the Kentucky Homeowner Application, Baldwin purchased a homeowner insurance policy through Kentucky National Insurance Company.
On October 13, 2019, a fire occurred and resulted in the total loss of the above-described home.
On March 5, 2020, after denying Baldwin’s coverage, Kentucky National Insurance Company (hereinafter “KNI”) filed a Complaint for Declaration of Rights and Monetary Damages arising from the house fire on October 13, 2019.

KNIC filed a motion for summary judgment. Because of the admitted misrepresentations in the application, KNIC maintained that it was permitted to rescind the homeowner’s insurance policy and the Circuit Court agreed.

Baldwin argued that she did not make the misrepresentations in the application. Rather, Baldwin asserted that Van Haverstock or an employee under his direction completed the application, and she merely signed same without reading it. The circuit court rendered summary judgment in favor of KNIC and Haverstock. In so doing, the circuit court reasoned that it was undisputed that Baldwin did not read the application before signing it; that above Baldwin’s Signature was the language that avered: ‘I have read the entire application and I warrant that to the best of my knowledge and belief all of the statements made herein are true.”

In this case, it is undisputed that Baldwin suffered a major fire loss to her previous home in 1994 and was paid $90,000 by her homeowner’s insurance company. It is also uncontroverted that in the insurance application with KNIC, Baldwin was asked if she “ever had a fire loss,” and the answer was no. Baldwin signed the insurance application without reading it. Because Baldwin was solely responsible for the answers in the application, the misrepresentations were only her responsibility and KNIC was entitled to rely on the statements and could rescind the policy when it was established that the application contained false representations.

The Court of Appeals concluded that the circuit court properly rendered summary judgment dismissing Baldwin’s claims against KNIC.

Baldwin tried to avoid the rescission by claiming she relied on the broker and did not read the application because she trusted the broker. The trust was misplaced because she signed the application without reading and finding the misrepresentations to which she admitted at deposition. She was responsible for the statements in the application and as a result had no insurance at the time of the fire.

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