In Penn Nat’l Security Ins. Co. v. Kapinus, a Pennsylvania court recently considered whether a material misrepresentation could void the policy even though the statement was made in connection with a claim rather that at the time of the insured’s initial insurance application. This declaratory judgment action arose out of a claim that, while accompanying his father to a construction site, claimant Tyler Kapinus was struck by his father’s company truck and was injrued. The insured owned an excavation and construction business and held a commercial automobile policy with Penn National Insurance Company.

Penn National filed a declaratory judgment action seeking a determination that its insurance policy did not provide coverage for the personal injury lawsuit at issue. Penn National argued that the policy precludes coverage if the insured made a material misrepresentation regarding a claim or fails to cooperate with the insurer in the investigation of the claim.

Penn National contended that the insured sought to avoid the application of the coverage exclusion for work-related injuries by making material misrepresentations and failing to provide pertinent information regarding the claim. The insurer stated that the insured falsely represented that his son never worked for his business and further refused to identify bank records which may reflect the son’s prior employment with the insured.

Tyler filed preliminary objections, arguing that the material misrepresentation exclusion only applies to false statements made by an insured to induce the issuance of a policy, not to subsequent fraud by an insured in connection to a claim. Tyler further contended that the duty to provide pertinent information regarding the claim only requires the insured to assist in defending against the merits of an underlying personal injury action and not to aid the insurer in developing a basis to deny coverage for that claim.

The court decided that the plain language of the policy provides that there is no coverage if the insured misrepresents a material fact concerning a claim under the coverage, and because the insured intentionally misrepresented his son’s work history, the insurer had a viable basis for denying coverage under the appropriate exclusion. However, the court disagreed with the insurer’s claim that the insured failed to cooperate with the investigation, concluding that the bank records were not relevant to the evaluation and defense of the son’s lawsuit.

Thanks to Chelsea Rendelman for her contribution to this post and please write to Mike Bono for more information.