May 03, 2011

Dierssen-Morice Recommends Steps for Businesses to Avoid Loss of Insurance Coverage

The recent ruling by the 8th U.S. Circuit Court of Appeals in Pioneer Industries, Inc. v. Hartford Fire Insurance Company is a wake-up call to companies who allow one person to apply for insurance, Rikke Dierssen-Morice told Minnesota Lawyer. According to the ruling, a commercial insurer was not obligated to cover the loss, from embezzlement, to a company where the insurance purchaser was the embezzler, who made material misrepresentations in the applications, increasing the insurer's risk of loss.

 Dierssen-Morice recommended that there should be at least two people vetting insurance applications to avoid a potential loss of coverage. She noted that another outcome of the case, the court's denial of reimbursement of an old claim paid out by Hartford, offers at least a glimmer of hope to a business that has made a misrepresentation or mistake in its insurance application.  Giving the benefit of ambiguities to the insured – if the insurer at some point informed the insured that the coverage was being cancelled and required a new application and evaluation of the insured in order to issue a new policy – the court said that the policies in effect before the cancellation notice could not be rescinded.  (The full article is available to subscribers only.)

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