MAY 2009 BAD FAITH CASES MISREPRESENTATIONS OCCURRING AFTER THE INSURANCE BINDER IS ISSUED ARE IMMATERIAL AND NOT BASIS TO VOID POLICY (Third Circuit)
In National Grange Mutual Insurance Company v. CRS Auto Parts, the court upheld the lower court’s Findings of Facts and Conclusions of Law against the insurer in a declaratory judgment action. Nat’l. Grange Mut. Ins. Co. v. CRS Auto Parts, Inc., 2007 U.S. Dist. LEXIS 84833, 2007 WL 4078728 (E.D. Pa. Nov. 16, 2007).
The carrier had attempted to declare the policy void because of alleged misrepresentations in obtaining the policy.
The appeals court observed that: “When attempting to void an insurance policy under Pennsylvania law, the insurer must prove that: (1) the insured made a false representation; (2) the insured knew the representation was false when it was made or the insured made the representation in bad faith; and (3) the representation was material to the risk being insured.”
The appeals court agreed there were no misrepresentations by the insured and any that could have been made would have been immaterial because they would have occurred after the insurer’s agent issued a binder. The court thus upheld the trial courts finding that policy was thus in effect at the time of the accident for which the insured filed a claim.