The Michigan Court of Appeals recently found that providing partial information on an application for insurance constitutes a false representation. The case is Electric Stick, Inc v Primeone Insurance Company, unpublished case 327421, decided September 15, 2016. When Electric Stick filled out their application for insurance they answered yes to a number of questions that required the applicant to provide an explanation. In their explanation, Electric Stick only listed one of their prior bankruptcy filings and failed to disclose existing tax liens. Electric Stick argued that they disclosed all of their financial records to defendant and a thorough review of the records would have disclosed the additional bankruptcies and tax liens. However, the court found that an insurer has no duty to investigate or verify the representations of a potential insured and that the plaintiff’s failure to disclose additional bankruptcy proceedings and tax liens constituted false representations, which the defendant relied upon to issue an insurance policy. As such, the defendants were able to avoid their contractual obligations under the existing insurance policy.
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